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Transition to retirement update

A transition to retirement allows older workers who are moving towards retirement to continue working, while at the same time, draw down on some of their superannuation benefits. Since its introduction in 2005 by the Australian Government, the policy has been used by many Australians as a strategy to save tax and boost super before retirement.

Under the tax office’s new transition to retirement rules, those who have reached their preservation age are now able to reduce their working hours without having to reduce their income.

Individuals can do this by topping up their part-time income with a regular ‘income stream’ from their super savings. Under previous rules, taxpayers could only access their super once they turned 65 or retired.

Under the new regulations, individuals can only access their superannuation benefits as a ‘non-commutable’ income stream. A non-commutable income stream cannot be converted into a lump sum. This means that individuals cannot take their benefits as a lump sum cash payment while they are still working. Instead, they must take their superannuation benefits as regular payments.

Employers are still required to make compulsory super guarantee contributions for all eligible employees, which includes people on a transition to retirement.

Those considering the tax aspects of retirement or a transition to retirement should seek financial advice to find out what is best for their individual circumstances.

Posted on 2 February '16 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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