Evidence-backed. Sourced from the ATO, Treasury, and the SIS Act. General information only — not financial advice. TTR strategies are complex — consult a licensed financial adviser before implementing. Last updated: June 2026.
⚡ Key Takeaways
- From your preservation age (age 60 for anyone born after 1 July 1964), you can start a Transition to Retirement (TTR) income stream from your super — while still working full-time or part-time. [1]
- TTR pension payments from age 60 are completely tax-free. Combined with salary sacrifice into super, many workers in their 60s can maintain their take-home pay, reduce their tax bill, and grow their retirement savings simultaneously. [1]
- You must draw between 4% and 10% of your TTR account balance each financial year — you cannot draw nothing, and cannot draw more than 10%. [2]
- Since 1 July 2017, earnings inside a TTR pension account are taxed at 15% (not zero) — a change that reduced the tax efficiency of TTR strategies for some members. [3]
- The Division 296 tax (effective 1 July 2026) adds another consideration for high-balance members using TTR strategies. [4]
Transition to Retirement Australia 2026: The Super Strategy Most 60-Year-Olds Don’t Know About
Most Australians spend their 60s working full-time, building super, and waiting for retirement. Far fewer know that from age 60, they can start drawing a tax-free pension from their super — while still working — and use it alongside salary sacrifice to legally reduce their tax bill and boost their retirement savings at the same time. It’s called Transition to Retirement. Here is exactly how it works, who it benefits, and the 2026 rule changes every older worker needs to know.
General information only. Not financial advice. TTR strategies have individual tax and Centrelink implications — consult a licensed financial adviser before implementing.
Table of Contents
- What is Transition to Retirement?
- How a TTR income stream works
- The classic TTR + salary sacrifice strategy
- The 2017 tax change that changed TTR forever
- Who TTR still benefits — and who it doesn’t
- 2026 changes: Division 296 and TTR
- Frequently asked questions
What Is Transition to Retirement?
A Transition to Retirement (TTR) income stream is a pension you can start drawing from your superannuation once you reach your preservation age — without needing to permanently retire. It was introduced to give older Australians more flexibility to wind down their working hours gradually, without suffering an immediate drop in income. [1]
Your preservation age depends on when you were born. For anyone born on or after 1 July 1964, the preservation age is 60. If you were born earlier, your preservation age may be as low as 55, though these cohorts are now approaching or past full retirement age anyway.
How a TTR Income Stream Works
When you start a TTR pension, a portion of your super balance is moved into a TTR “pension account” — a separate account from which you draw regular income payments. The key rules are: [2]
- Minimum drawdown: 4% of the account balance per financial year (same as an account-based pension)
- Maximum drawdown: 10% of the account balance per financial year — this is the TTR-specific cap
- Lump sum withdrawals: not permitted from a TTR account. You can only take regular pension payments.
- Payment frequency: at least annually; most members take monthly or fortnightly payments
- Tax on payments from age 60: completely tax-free regardless of the components of your super balance. [1]
The Classic TTR + Salary Sacrifice Strategy
The most common TTR strategy works like this. Suppose you earn $120,000 per year and are 62. You start a TTR and salary sacrifice $20,000 of your salary into super. Your taxable income drops from $120,000 to $100,000 — reducing your income tax. Meanwhile, you draw $20,000 from your TTR pension account, tax-free, to replace the salary you sacrificed. Net result: your take-home pay is the same, your tax bill is lower (because you’ve moved money from being taxed at your marginal rate to 15% contributions tax, and the pension income is tax-free), and you’re building more super simultaneously. [1]
The size of the benefit depends on your salary, marginal tax rate, and super balance. At higher income levels, the tax saving is larger. An adviser can model the exact numbers for your situation.
The 2017 Tax Change That Changed TTR Forever
Before 1 July 2017, investment earnings inside a TTR pension account were tax-exempt — the same treatment as a full retirement phase account-based pension. This made TTR very attractive even for members who didn’t need the income, purely as a tax-sheltering strategy. [3]
From 1 July 2017, this changed. TTR pension accounts now pay 15% tax on investment earnings — the same rate as an accumulation account. Only when you fully retire (meet a condition of release) and move into “retirement phase” do your pension earnings become tax-free. This change significantly reduced the attractiveness of TTR as a pure tax shelter for members who didn’t actually need the income, while preserving its usefulness for members genuinely managing the transition to part-time work or lower income. [3]
Who TTR Still Benefits — and Who It Doesn’t
TTR is likely still beneficial if:
- You are 60+ and earning income taxed at 32.5% or above (taxable income above $45,000 in 2025–26)
- You want to reduce your working hours but need to maintain your income level
- You are contributing via salary sacrifice and can replace that salary with tax-free TTR income
- You have a moderate to large super balance and can draw meaningful amounts within the 4–10% range
TTR is less valuable if:
- Your marginal income tax rate is low (15% or below) — there’s minimal tax gap to arbitrage
- You have a small super balance — the 4–10% range may not produce meaningful income
- You are close to full retirement and the complexity of a TTR outweighs the benefit period
- You receive Centrelink benefits — TTR income can affect means-testing assessments
2026 Changes: Division 296 and TTR
From 1 July 2026, the Division 296 tax imposes an additional 15% tax on earnings attributed to super balances above $3 million. TTR pension account balances count toward your Total Super Balance for this purpose. For members with balances approaching or exceeding $3 million, the Division 296 tax changes the calculus around how much to hold in a TTR account versus other structures. [4] This is an area where professional financial advice is particularly valuable.
Frequently Asked Questions
What age can I start a TTR?
Your preservation age — which is 60 for anyone born on or after 1 July 1964. You don’t need to retire or reduce your hours to start a TTR income stream.
How much can I draw per year?
Between 4% and 10% of your TTR account balance. Minimum 4% must be drawn each year. Maximum 10%. No lump sum withdrawals permitted.
Is TTR income tax-free from age 60?
Yes — completely. TTR pension payments from age 60 are tax-free regardless of the components of your balance. This is the key tax advantage of TTR for workers in their 60s.
What changed in 2017?
Investment earnings inside a TTR account became taxable at 15% (previously tax-exempt). This reduced TTR’s appeal as a pure tax shelter but preserved its value for workers genuinely transitioning to lower hours or income.
🔍 The Fine Print Verdict
TTR is not the unlimited tax shelter it once was — the 2017 earnings tax change took care of that. But for workers aged 60+ who are earning above $45,000 taxable income and willing to engage with a simple salary sacrifice strategy, it still delivers real, calculable tax savings without any change to their take-home pay. The complexity is real but manageable with the right advice. And the window to use it is finite — once you fully retire, you move into the retirement phase and the TTR rules no longer apply anyway.
If you’re 60+, still working, and earning above $45,000 taxable income: Ask a licensed financial adviser to model a TTR + salary sacrifice strategy for your numbers. The modelling appointment costs less than the tax you may be overpaying.
Sources
- ATO, Transition to retirement income stream. ato.gov.au
- ATO, Minimum annual payments for super income streams. ato.gov.au
- Treasury, Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 — Explanatory Memorandum (TTR earnings tax change). treasury.gov.au
- Treasury, Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 — Division 296. treasury.gov.au
Disclaimer: The Fine Print 🇦🇺 provides general financial information only. TTR strategies have individual tax, Centrelink, and insurance implications that vary significantly by personal circumstances. Always consult a licensed financial adviser before implementing a TTR strategy. Content accurate as at June 2026.