A Transition to Retirement (TTR) enables people aged 55 or over in Australia to access their super in the form of a pension or income stream without retiring or satisfying other conditions of release. Although some use TTRs for a gradual transition into retirement, the majority use the strategy for boosting their super savings and reducing tax, while working full or part time. The popular ‘salary sacrificing and TTR’ strategy is generally used by those in full-time employment and/or those on higher incomes.
A super fund doesn’t have to offer Transition To Retirements, and your super fund or Self Managed Super Fund may not offer this type of income stream. Ask your super fund whether they offer TTR, and whether there is a special form for this type of income stream.
The legislation for the conditions of release applicable to TTRs can be found in Regulation 6.01 of the Superannuation Industry Supervision (SIS) Regulations 1994, and in Schedule 1 (item 110) of the SIS Regulations. A condition of release is satisfied for starting a TTR if an individual has reached preservation age, currently age 55, depending on year of birth as follows –
Date of Birth Preservation Age
Before 1/7/1960 55
1/7/60 – 30/6/1961 56
1/7/61 – 30/6/1962 57
1/7/62 – 30/6/1963 58
1/7/1963 – 30/6/1964 59
1/7/1964 onwards 60
The condition of release rule makes no mention of whether an individual is working full-time or part-time. The regulations do state the rules applicable, such as a max 10% of the account balance can be withdrawn each year, and that the income stream must be non-commutable (that is, not able to be converted to a lump sum).
Note that if you’re aged 55 or over and retired, and you have reached your preservation age, you can withdraw your super benefits without the need to start a Transition To Retirement. You can start a minimum account-based pension, or you can draw a lump or full sum.