What is a Transition to Retirement (TTR) strategy?

A TTR strategy lets you draw a pension from your super while still working. The key benefit is combining TTR income with salary sacrifice — you redirect part of your salary into super (taxed at 15%) while replacing that income with TTR pension payments. This can reduce your overall tax bill, especially if your marginal rate is 37% or higher.

Are TTR pension earnings tax-free?

No — this is a common misconception. TTR pension earnings inside the fund are taxed at 15% (the accumulation rate). Only when you fully retire and convert to an account-based pension do earnings become tax-free (0%). This is an important distinction when calculating the net benefit of a TTR strategy.

What is the minimum and maximum TTR drawdown?

For a TTR pension, the minimum drawdown is 4% of your account balance per year (for ages 60-64) and the maximum is 10%. You cannot withdraw lump sums from a TTR pension — only regular pension payments within the 4-10% range. Once you fully retire, the maximum restriction is removed.

Who benefits most from a TTR strategy?

TTR is most beneficial for people with a marginal tax rate of 37% or higher (income above $135,000). At lower marginal rates, the gap between your tax rate and the 15% super contributions tax is smaller, so the saving is less. If your marginal rate is 16% or below, a TTR strategy provides no tax benefit.

What is the preservation age for TTR?

You must have reached your preservation age to start a TTR pension. For most people born after 1 July 1964, the preservation age is 60. For those born earlier, it ranges from 55 to 59 depending on your date of birth. You do not need to stop working — that's the whole point of TTR.

Transition to Retirement Calculator Australia — FY 2025-26

Model your TTR strategy — draw a pension while salary sacrificing to save tax. Compare scenarios and plan your wind-down to full retirement.

TTR lets you draw a pension from super while still working — salary sacrifice the equivalent to save tax. TTR earnings are taxed at 15% (not tax-free like retirement pensions).

Your age

Must have reached preservation age (60 for most)

Super balance

Current superannuation balance

Annual salary

Gross annual salary before tax

Planned salary sacrifice

Amount to salary sacrifice into super (counts toward $30K cap)

TTR drawdown rate

Min 4%, max 10% of account balance

—

Try another scenario

Found an issue? Send feedback

How to Use This Calculator

Tab "TTR Strategy"

Enter your age, super balance, annual salary, planned salary sacrifice, and TTR drawdown rate (4-10%). The calculator shows your TTR income, reduced salary after sacrifice, annual tax saving, net income change, and the impact on your super balance. The strategy works by replacing salary (taxed at your marginal rate) with TTR pension income while redirecting the salary into super (taxed at just 15%).

Tab "Tax Comparison"

Compare your total tax with and without a TTR strategy. Enter your salary, super balance, and marginal tax rate. See the annual tax saving and whether TTR makes sense at your income level. TTR is most effective when your marginal rate is 37% or higher.

Tab "Wind-Down Plan"

Plan your transition from full-time work to retirement. Enter your current age, target retirement age, super balance, drawdown rate, and salary reduction. See your projected super balance at retirement, total tax saved over the TTR period, and potential impact on Age Pension eligibility.

The Formulas

TTR income:
Super balance x Drawdown rate (4-10%)

Salary sacrifice tax saving:
Sacrifice amount x (Marginal rate - 15%)

Net income with TTR:
(Salary - Sacrifice) - Tax on reduced salary + TTR income

TTR earnings tax (inside fund):
Fund earnings x 15% (NOT tax-free — only retirement pensions are 0%)

Total tax comparison:
Without TTR: Income tax on full salary
With TTR: Income tax on reduced salary + 15% contributions tax on sacrifice
Saving = Without - With

FY 2025-26 tax brackets (Stage 3):
$0 - $18,200: 0%
$18,201 - $45,000: 16%
$45,001 - $135,000: 30%
$135,001 - $190,000: 37%
$190,001+: 45%

TTR pension earnings inside the fund are taxed at 15% — the same rate as accumulation phase. This is a critical distinction from account-based pensions in full retirement, where earnings are tax-free. The tax benefit of TTR comes from the salary sacrifice side, not the pension earnings side.

Example

David — Senior Engineer, Age 62, Salary $140,000, Super $550,000

David salary sacrifices $20,000 and draws 6% TTR pension ($33,000). He is over 60, so TTR pension payments are tax-free to him.

TTR income (6% drawdown)$33,000/year (tax-free at 60+)

Reduced salary$120,000 ($140K - $20K sacrifice)

Tax without TTR$31,067

Tax with TTR$25,867 ($22,867 income tax + $3,000 contributions tax)

Annual tax saving$5,200

David saves $5,200 per year in tax by salary sacrificing $20,000 (taxed at 15% in super instead of his 37% marginal rate) and replacing that income with his TTR pension. His net income stays similar while his tax bill drops. Note: TTR earnings inside his fund are still taxed at 15% — they only become tax-free when he fully retires.

TTR Key Rules — FY 2025-26

Item	Rate / Limit
Preservation age	60 (born after 1 July 1964)
Minimum drawdown (age 60-64)	4% of account balance
Maximum drawdown (TTR)	10% of account balance
TTR earnings tax (inside fund)	15% (NOT tax-free)
Retirement pension earnings tax	0% (tax-free)
Concessional contribution cap	$30,000
Super contributions tax	15%
SG rate	12%
TTR pension income (age 60+)	Tax-free to recipient
Lump sum withdrawals (TTR)	Not permitted

Frequently Asked Questions

Are TTR pension earnings really taxed at 15%?▼

Yes. This is one of the most common misconceptions about TTR. While account-based pensions in full retirement have tax-free earnings (0%), TTR pensions are taxed at 15% on investment earnings inside the fund — the same rate as the accumulation phase. The tax advantage of TTR comes from salary sacrifice (15% vs your marginal rate), not from the pension earnings treatment.

Can I withdraw a lump sum from my TTR pension?▼

No. TTR pensions only allow regular pension payments (income stream) between the 4% minimum and 10% maximum of your account balance per year. You cannot access a lump sum until you meet a condition of release — such as fully retiring after preservation age, reaching age 65, or permanent incapacity. Once you fully retire, the 10% maximum restriction is also removed.

What if my marginal rate is only 30%?▼

At a 30% marginal rate, salary sacrifice into super saves you 15 cents per dollar (30% - 15%). While this is still a benefit, it is less impactful than for someone on the 37% or 45% rate. You should also consider the 15% earnings tax on TTR pension earnings and any fees for setting up a TTR pension. For some people on the 30% rate, the administrative cost may outweigh the tax saving — run the numbers using the calculator.

Does TTR affect my Age Pension?▼

Potentially. Drawing down your super via a TTR pension reduces your super balance, which could affect the assets test for Age Pension. However, if you're salary sacrificing and building super at the same time, the net effect depends on whether contributions exceed drawdowns. At retirement, your super is assessed under both the assets test and income test (deeming). A higher super balance may reduce your Age Pension entitlement.

When should I convert my TTR to a retirement pension?▼

Convert as soon as you meet a condition of release (usually fully retiring after preservation age or turning 65). Once converted to an account-based pension, your fund's investment earnings become tax-free (0% instead of 15%), the 10% drawdown maximum is removed, and you can access lump sums. This is a significant tax benefit — don't stay in TTR mode longer than necessary.

Related Calculators

Embed This Calculator

Add the sum.money Transition to Retirement Calculator to your website. Free, responsive, always up to date.