How Transition to Retirement Works

If you don’t want to fully retire and would like to reduce your working hours you can take advantage of what is know as “Transition to Retirement" TTR. This means that providing you have reached your preservation age you can elect to keep working full time or part- time and take money out of your super to supplement your income. This is popular for those who want to scale down their working hours rather than retiring.

Date of Birth                                          Preservation Age
Before 1 July 1960                                              55
1 July1960 - 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
1 July 1964 - 30 June 1965                            60

When you are receiving a TRIS , you can still work and claim a tax deduction for concessional  contributions into super currently $27,500 for the 2024 financial year, and then increasing  to $30,000 from the 1st July 2024..

If you decide to implement a TTR strategy,  you must withdraw a minimum amount  currently 4% for someone aged 60 (based on age) from your superannuation account balance up to a maximum of 10%. .

If you are under 60 any amount you withdraw will be subject to tax at your marginal rate of tax . You will also be entitled to receive a tax rebate of 15%. After the age of 60, the good news is that any amount you withdraw is TAX FREE!

Case Study 1 : Sue reduces her work hours

Sue  has just turned 60 and  earns $50,000 a year before tax. She decides to ease into retirement by reducing her work to three days a week. This means her income will decrease  to $30,000.  Sue transfers $155,00, of her super to a transition to retirement pension and withdraws $9,000 each year, tax-free. This replaces some of her lost pay.

Case Study 2: Bill reduces his tax

Bill  is 60 and earns $100,000 a year. He intends to keep working full-time for at least another five years. Bill starts a TTR.  He then uses the money withdrawn  to re contribute into super and claim a tax deduction. 
This will reduce his income tax, but also his take-home pay.  He tops up his income by withdrawing up to 10% of his TTR pension balance each year.

As you can see the TRT strategy is very useful for people wanting to scale down their work and supplement their income by drawing from superannuation and also reducing tax.

ACCOUNTS BASED PENSION

If you are aged 60 + and retired or 65+ and still working , I have good news for you! There are significant tax advantages in taking an Accountants Based  Pension from your super. Not only are the withdrawals you make  tax- free,  but also the earnings within your superannuation fund are tax-free to 1.9 million dollars. 

 Although  you must withdraw minimum amount must be paid each year for pensions as per the table below, there  are  no limits on the amount you can withdraw.

The minimum amount for ages: 

Under  65 is 4%
 65 to 74 is 5%
 75 to 79 is 6%
 80 to 84 is 7%

Anyone that is eligible to receive an accounts based pension, should  give it serious consideration because the tax benefits are significant due to 0% tax rate on earnings and capital gains, including the refund of imputation tax credits. 

I hope you enjoyed reading this article. If you would like my team and I to help you plan your retirement, please contact us for a free no obligation meeting.  
- Chris Tolevsky 

Disclaimer: This information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.