Super Strategies – top up your income when cutting back work

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If you plan to scale back your working hours, starting a transition to retirement pension could help you to replace your reduced income.


To use this strategy, you need to invest some of your super in a transition to retirement (TTR) pension.

The key benefit of doing this is you can receive an income from the TTR pension to replace the income you’ll forgo when reducing your working hours.

Also, you’re likely to pay less tax on the income you receive from the TTR pension than you do on your salary or business income.

This is because even though the taxable income payments from a TTR pension are taxed at your marginal tax rate, they will attract a 15% tax offset between preservation age¹ and 59. Also, the income payments are tax-free² at age 60 or over.

As a result, you’ll generally need to draw less income from the TTR pension to replace your reduced salary.


There are some key issues you’ll need to consider before starting a TTR pension.

For example:

  • you’ll need to draw a minimum income each year, which is 4% of the account balance per annum
  • You can’t draw more than 10% of the account balance each year, and
  • You can only take a cash lump sum (or purchase a different type of income stream) once you permanently retire, reach age 65 or meet another ‘condition of release’.


If you have reached your preservation age and retire permanently (or meet another condition of release) you may be able to invest your super in an ordinary account based pension, rather than a TTR pension.

No tax will be payable by your fund on investment earnings in an account based pension, whereas earnings in a TTR pension are taxed at a maximum rate of 15%.

Also, an account based pension is not subject to the maximum income and withdrawal restrictions associated with a TTR pension.

However, lifetime limits regulate how much you can transfer into an account based pension. In 2019/20, this limit is $1.6 million (subject to indexation).

These rules are complex. More information on starting an account based pension can be found in our super strategy Convert your super into a tax-effective retirement income, or speak to your Westlawn Financial Adviser.

Your Westlawn Financial Adviser can help you assess all the issues that need to be considered and determine whether a TTR pension suits your needs and circumstances.

Contact us today:

¹ Preservation age is 55 for those born before 1 July 1960 and gradually increases to 60 depending on your date of birth.
² Assumes the TTR pension is commenced from a taxed super fund.


Source: MLC (National Australia Bank Limited ABN 12 004 044 937, AFSL 230686)

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All of the material published on this website is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances. Westlawn Wealth Management Pty Ltd ABN 32 124 861 409 Corporate Authorised Representative of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857. Please note that Affinia Financial Advisers Limited is not responsible for the advice and services provided by Westlawn Finance Limited, Westlawn Insurance Brokers Pty Ltd, Westlawn Life Insurance Pty Ltd or Westlawn Business Services Pty Ltd.

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