Transition To Retirement Rules
Posted on:
Raffi Pailagian
MBA, BSc, DipFP
Financial Planner / Managing Partner
How A TTR Pension Works In 2026
(Last Updated 21/10/2026)
A transition to retirement (TTR) pension lets you draw 4% to 10% of part of your super each year while you keep working, once you reach preservation age. For anyone starting one in 2026 that means age 60 or over, so the payments are tax-free. Earnings are still taxed at up to 15% until you retire or turn 65.
Quick Summary
From 60 you can draw 4% to 10% of a TTR balance yearly, tax-free, while working. It suits people cutting their hours or salary sacrificing on a 30% tax rate or higher. Low incomes, small balances, insurance in super or a partner on the Age Pension can erase the benefit.
Table Of Contents
- What Is A Transition To Retirement Pension?
- Who Can Start A TTR Pension In 2026?
- TTR Pension Rules At A Glance
- How A TTR Pension Is Taxed
- The Two Main Ways People Use A TTR Pension
- When A TTR Pension Isn’t Worth It
- What Happens When You Turn 65 Or Retire
- TTR Pensions & Centrelink
- How To Start A TTR Pension, Step By Step
- Final Thoughts
- Frequently Asked Questions (FAQ)
What Is A Transition To Retirement Pension?
A transition to retirement pension, also called a TTR pension or a transition to retirement income stream (TRIS), lets you take a regular income from your super while you’re still working. You move part of your super balance into a separate pension account, and your fund pays you an income from it (ATO).
It was designed for people who want to ease into retirement: working fewer days without a big drop in income, or staying full time while organising their super more efficiently before they stop. It’s one of several tools we look at as part of retirement planning.
The key limit is that a TTR pension is “non-commutable”. You can take regular payments, but you can’t withdraw a lump sum while you’re still working.
Who Can Start A TTR Pension In 2026?
You can start a TTR pension once you reach your preservation age, as long as you’re still working. Your preservation age depends on when you were born.
| Date Of Birth | Preservation Age |
| Before 1 July 1960 | 55 |
| 1 July 1960 – 30 June 1961 | 56 |
| 1 July 1961 – 30 June 1962 | 57 |
| 1 July 1962 – 30 June 1963 | 58 |
| 1 July 1963 – 30 June 1964 | 59 |
| From 1 July 1964 | 60 |
Source: (ATO)
The table matters less than it used to. Anyone born before 1 July 1964 is now at least 62 and well past their preservation age. For everyone else it’s 60. In practice, you can start a TTR pension in 2026 from age 60, which is why Moneysmart now describes it as an option for people “age 60 or older and still working” (ASIC Moneysmart).
Many older articles still talk about TTR at 55 and about tax on payments before 60. Those rules no longer apply to anyone starting a TTR pension today.
Your super fund may also set its own minimums. AustralianSuper, for example, requires you to transfer at least $10,000 into its TTR Income account and leave at least $6,000 in your super account.
TTR Pension Rules At A Glance
| Rule | What It Means In 2026–27 |
|---|---|
| Minimum annual payment | 4% of the account balance (under age 65) |
| Maximum annual payment | 10% of the account balance |
| Lump sum withdrawals | Not allowed while you’re still working |
| Tax on payments | Tax-free from age 60 (taxed super funds) |
| Tax on investment earnings | Up to 15%, the same as an accumulation account |
| Employer super | Your employer must keep paying the super guarantee, currently 12% |
| Transfer balance cap | Doesn’t count until the pension moves to the retirement phase. The cap is $2.1 million for 2026–27 |
| When it converts | At 65, or earlier if you retire or meet another condition of release |
Source (minimum payment): (ATO)
Source (10% maximum, tax on payments): (ASIC Moneysmart)
Source (lump sums, earnings, employer super, conversion): (ATO)
Source (super guarantee rate): (ATO)
Source (transfer balance cap): (ATO)
The 4% minimum catches people out. If you move $500,000 into a TTR pension, you must take at least $20,000 that year whether you need it or not. Only move the amount you actually need to draw from. You can leave the rest in your normal super account.
How A TTR Pension Is Taxed
Two different taxes apply, and confusing them is the most common mistake we see.
Tax On The Payments You Receive
Once you’re 60, payments from a TTR pension paid by a taxed super fund are tax-free, and you don’t include them in your tax return. As everyone eligible in 2026 is 60 or older, this covers nearly every new TTR pension (ASIC Moneysmart). If your super is in an untaxed public sector scheme, the rules are different and worth checking with your fund (ATO).
For a deeper look at how super income is treated after 60, see our guide Is Income From Super Tax-Free For Over 60s In Australia?
Tax On Investment Earnings Inside The Account
Before 1 July 2017, earnings on TTR pension assets were tax-free. That’s no longer the case. Assets supporting a TTR pension are now taxed at up to 15%, the same as a normal accumulation account, until the pension moves into the retirement phase (ATO).
| Feature | TTR Pension (Still Working, Under 65) | Retirement-Phase Account-Based Pension |
|---|---|---|
| Who can have one | Reached preservation age and still working | Retired, turned 65 or met another condition of release |
| Annual payments | 4% to 10% | Minimum 4% under 65, 5% at 65–74, rising with age. No maximum |
| Lump sums | No | Yes |
| Tax on payments at 60+ | Tax-free | Tax-free |
| Tax on earnings | Up to 15% | Tax-free |
| Counts towards transfer balance cap | No | Yes |
Source (minimum payment factors): (ATO)
Source (earnings and transfer balance cap): (ATO)
If you’re already retired, a TTR pension isn’t the right product. Our guide to account-based pensions explains how the retirement-phase version works.
The Two Main Ways People Use A TTR Pension
Strategy 1: Work Less Without A Big Pay Cut
This is what TTR was built for. You cut back your hours and use pension payments to replace some or all of the lost take-home pay.
Here’s a simplified example. Sarah is 61, earns $100,000 and drops from five days to four. Her salary falls to $80,000.
| Feature | Five Days | Four Days + TTR Pension |
|---|---|---|
| Salary | $100,000 | $80,000 |
| Income tax and Medicare levy on the $20,000 she no longer earns (30% + 2%) | $6,400 | $0 |
| Drop in take-home pay | – | $13,600 |
| Tax-free TTR payment to cover it | – | $13,600 (5.4% of a $250,000 TTR balance) |
| Employer super guarantee at 12% | $12,000 | $9,600 |
Source (2026–27 tax rates, 30% bracket $45,001–$135,000): (ATO)
Source (super guarantee 12%): (ATO)
Sarah’s take-home pay is unchanged and she gets an extra day off each week. The cost is that her super is now being drawn down, and her employer contributions fall by $2,400 a year. Illustrative only: it ignores tax offsets, fees and investment returns.
Strategy 2: Salary Sacrifice Plus TTR
The second approach suits people who want to keep working full time. You salary sacrifice part of your pay into super, where it’s taxed at 15% instead of your marginal rate, and use tax-free TTR payments to replace the lost take-home pay. Your lifestyle stays the same, but more money ends up in super.
Moneysmart notes this works best for people aged 60 or older on an above-average taxable income.
Example: David is 61 and earns $120,000. His employer pays 12% super guarantee ($14,400). The concessional contributions cap for 2026–27 is $32,500, which leaves room for $18,100 of salary sacrifice. He has $650,000 in super and moves $300,000 into a TTR pension.
| Step | Amount |
|---|---|
| Salary sacrificed into super | $18,100 |
| Income tax and Medicare levy saved (32%) | $5,792 |
| Contributions tax paid by the fund (15%) | $2,715 |
| Net amount added to super | $15,385 |
| Drop in take-home pay ($18,100 – $5,792) | $12,308 |
| Tax-free TTR payment to replace it (4.1% of $300,000) | $12,308 |
| Net gain to super each year | $3,077 |
Source (concessional cap $32,500 for 2026–27): (ATO)
Source (2026–27 tax rates and 2% Medicare levy): (ATO)
David’s take-home pay doesn’t change, and his super is roughly $3,000 a year better off. Over four years to 65 that’s about $12,000 before investment returns. Useful, but not life-changing, and it only works because he has unused cap room and a 30% marginal tax rate. Illustrative only: it ignores tax offsets, fees and investment returns.
Note that he moved $300,000, not his full $650,000. A $650,000 TTR pension would force at least $26,000 out each year, more than he needs.
If your total super balance was under $500,000 on 30 June last year, you may also be able to use unused cap amounts from the past five years (ATO). Our article on the concessional contributions cap explains how carry-forward works.
Not sure which strategy suits you?
Our Team Look Forward To Discussing Your Situation & Requirements!
When A TTR Pension Isn’t Worth It
Search interest in “transition to retirement disadvantages” is high for good reason. TTR suits some people well and others hardly at all.
| Usually A Good Fit | Usually A Poor Fit |
|---|---|
| 60–64, still working, planning to stop within a few years | Under preservation age, or already retired |
| Taxable income in the 30% bracket or higher | Taxable income under $45,000, where your tax rate is close to the 15% contributions tax |
| Unused concessional cap room | Employer contributions already use most of the $32,500 cap |
| Wants to cut hours but needs the same income | Planning to spend the TTR payments rather than replace lost pay |
| Combined income and super contributions below $250,000 | Over $250,000, where Division 293 adds another 15% contributions tax |
Source (2026–27 tax brackets): (ATO)
Source (Division 293 threshold): (ATO)
A few other risks are worth checking before you start.
Insurance inside super. If you hold life or TPD cover through super, you need to keep enough in your accumulation account to pay the premiums. Moving too much into a TTR pension can let cover lapse at an age when it’s expensive or impossible to replace (ASIC Moneysmart).
A smaller balance at retirement. If the TTR payments become extra spending money rather than replacing lost pay, you’re simply retiring with less. Moneysmart flags this as the main downside (ASIC Moneysmart).
Market timing. Drawing down in the years just before retirement is when a market fall does the most damage. Our article on sequencing risk explains why.
Two accounts, two sets of fees. Check what your fund charges for the pension account. Fees vary a lot between funds.
What Happens When You Turn 65 Or Retire
A TTR pension moves into the retirement phase when you turn 65, or earlier if you retire, become permanently incapacitated or are diagnosed with a terminal medical condition (ATO). If you retire before 65, you need to tell your fund (ATO). Some funds, such as AustralianSuper, convert the account automatically at 65.
Once it converts:
- investment earnings become tax-free
- the 10% maximum falls away, and you can take lump sums
- the balance starts counting towards your transfer balance cap of $2.1 million (2026–27)
Source (transfer balance cap): (ATO)
For retirement in Australia, “retired” has a specific meaning. If you stop work at 60 or older, or after preservation age with no intention of working again, your fund can treat you as retired (ATO).
This is a good point to review your whole retirement income plan. Our guide to retirement income planning in Australia covers the next steps.
TTR Pensions & Centrelink
A TTR pension can affect your own or your partner’s government benefits. This matters most for couples where one partner is already on the Age Pension and the other is still working (ASIC Moneysmart).
Account-based pensions are deemed for the income test. Services Australia assumes the whole balance earns a set rate, regardless of how much you actually draw. Since 20 March 2026 the rates are:
| Household | Deemed At 1.25% | Deemed At 3.25% |
|---|---|---|
| Single | First $64,200 of financial assets | Amount above $64,200 |
| Couple (at least one on a pension) | First $106,200 combined | Amount above $106,200 |
Source: (Services Australia)
Moneysmart suggests speaking to the Services Australia Financial Information Service (FIS) before starting a TTR pension if you or your partner receive a government payment.
How To Start A TTR Pension, Step By Step
- Confirm you’re eligible. You need to be 60 or over (preservation age) and still working.
- Work out the gap you’re filling. Decide how much income you need from the pension, then size the TTR balance so that amount sits between 4% and 10%.
- Check your contributions cap. Add up your employer’s 12% and any existing salary sacrifice against the $32,500 cap before you increase anything.
- Check your insurance. Leave enough in your accumulation account to keep any cover you want.
- Read your fund’s Product Disclosure Statement. Note its minimum transfer amount, minimum remaining balance and fees.
- Open the TTR account and set your payments. Most funds let you do this online and choose a payment frequency.
- Update your salary sacrifice with your employer, if you’re using Strategy 2.
- Review every 1 July and before you turn 65. Caps, tax rates and your income change, and the pension converts automatically at 65.
If you’re still a few years away, our article on super investment strategies at 50 and 60 is a good place to start, along with how much super you need to retire comfortably.
Final Thoughts
A TTR pension is a flexible tool, but a narrower one than it was before 2017. Tax-free earnings are gone, and for most people the benefit now comes from two things: replacing lost pay when they cut their hours, or a modest gain from pairing salary sacrifice with tax-free pension payments.
The numbers depend heavily on your salary, how much cap room you have, your insurance and whether your partner receives Centrelink payments. Getting the size of the pension wrong, or ignoring insurance, can cost more than the strategy saves.
If you’re 60 or over and still working, model it before you start. Our retirement planning and superannuation advice services are built for exactly this decision.
Frequently Asked Questions (FAQ)
No. A TTR pension is a non-commutable income stream, so you can only take regular payments while you’re still working. Lump sums generally become available once you retire, meet another condition of release or turn 65 (ATO).
Payments from a taxed super fund are tax-free once you’re 60. As the preservation age is now 60 for anyone born from 1 July 1964, almost everyone starting a TTR pension in 2026 gets tax-free payments. Earnings inside the account are still taxed at up to 15% until you retire or turn 65 (ASIC Moneysmart).
Between 4% and 10% of the account balance each financial year. Your fund works out the dollar range from your balance and will tell you what it is (ATO).
No. You need to have reached your preservation age, but you can keep working full time. Many people use a TTR pension alongside salary sacrifice while working full time, and others use it to top up income after cutting back their hours (ASIC Moneysmart).
It moves into the retirement phase. The 10% maximum no longer applies, earnings on the account become tax-free and the balance starts counting towards your transfer balance cap, which is $2.1 million for 2026–27. The same happens earlier if you retire and tell your fund (ATO).
Yes. Your employer must keep paying the super guarantee, currently 12%, and you can salary sacrifice extra. Employer and salary sacrifice contributions together count towards the concessional contributions cap of $32,500 for 2026–27 (ATO).
It can, particularly if your partner already receives the Age Pension. Account-based pensions are deemed on the whole balance for the income test, not on the payments you actually take. Speak to an adviser or the Services Australia Financial Information Service before starting one (Services Australia).
Important Disclaimer: The information provided in this article is general in nature and does not constitute financial advice. Please consult with a qualified financial advisor to discuss your individual circumstances before making any decisions.
References:
ATO – Transition to retirement
ATO – Payments from super
Australian Super – TTR Income
ASIC Moneysmart – Transition to retirement
ATO – Super guarantee
ATO – Transfer balance cap
ATO – Transition to retirement income streams
ATO – Tax rates – Australian resident
ATO – Super guarantee
ATO – Contributions caps
ATO – Division 293 tax on concessional contributions by high-income earners
ATO – When you can withdraw your super
Services Australia – Media column – Hank Jongen’s April column – Deeming Explained
