Have your cake and eat it

Your transition to retirement may present a unique opportunity to tax-effectively boost your super balance.

By John Wasiliev - 4 min read

A little about John

John Wasiliev writes on personal finance specialising in superannuation and self managed super funds, managed funds and trusts.

As someone who is currently relying on super to provide income support during a move from full to part-time work, I strongly believe in the importance of superannuation.

Throughout my working life, my approach to super savings has mostly involved making tax deductible contributions to my super account from employment income and investing this as part of a long-term investment strategy.

Tax deductible contributions to super enjoy a 15 per cent tax rate, which allows you to invest 85 cents in every dollar you contribute. This low tax rate gives your savings a great start.

Investment earnings in super also enjoy a concessional tax rate of 15 per cent, allowing you to retain a large proportion of the money your super investments earn. The more investment earnings you retain, the greater the opportunity these amounts have to compound investment returns—where the earnings on your super generates more earnings, and so on.

Giving me comfort in the lead up to my retirement is one constant that I am very pleased about: the superannuation nest egg I have accumulated that I can draw upon as a tax-free super pension to help me deal with any financial challenges that arise and provide an additional source of income—even as I continue to work.

The way I can use my super while I am still working is through a special superannuation income stream (or pension) called a Transition to Retirement (TTR) product.


Just like any aspect of super, when accessing super through a TTR product, there are a number of important need-to-knows. These include: 

  • Super is available to you at any time after you have reached what is known as your preservation age. This is the age at which you can withdraw some of your super—and is 60 years for most people, although it may be lower depending on your date of birth.
  • Using a TTR product, you can only withdraw up to 10 per cent of your account’s balance in a year.
  • After age 60, the money you withdraw will be tax-free, while before that age, you may have to pay tax on the amount you withdraw from your fund.

What is also significant about this type of income stream is the opportunity it offers to access your super before you retire. This could allow you to do part-time work, but maintain your take-home pay by replacing employment income with an income stream drawn out of your super account.

TTR: a pre-retirement savings boost

A TTR product, used in conjunction with tax concessional contributions, may also allow you to top up your super savings in a tax-effective way, potentially allowing you to add thousands of extra dollars a year to your super over and above what an employer may be contributing on your behalf.

While you are working, your employer must make compulsory contributions into your super account. Since July 1, 2022, these contributions have been set at 10.5 per cent of your ordinary employment income—which includes ordinary hours at work, shift and casual loadings and various allowances and may include overtime payments.

For example, someone on an income of $70,000, for example, will receive a compulsory employer super contribution of $7,350.

While an employment-related super entitlement is calculated as a percentage of income, the actual tax concessional contribution amount allowed under super rules is a fixed dollar value “cap” that is currently $27,500 a year. You may have a higher cap if you have ‘unused’ concessional contributions amounts from previous financial years.

This difference means that someone earning $70,000 could contribute an extra $20,150 ($27,500 less the $7,350 of compulsory employer super contributions) before reaching the cap.

While more of any earned employment income can be contributed to super (up to the $27,500 cap), this will need to be in the form of a salary sacrifice arrangement, which is a contribution made to super from before tax income under a special agreement with an employer.

The challenge in this set of circumstances will become how to live off employment income that has been reduced by the extra $20,150 super contribution.

To replace this income, one option would be to draw money out of the superannuation account using a TTR product, in much the same way as if you had reduced your income as a result of moving to part-time work.

Using a TTR product in this way could see you take greater advantage of the $27,500 tax concessional entitlement.

A unique strategy

In a nutshell, a transition to retirement income stream approach to super savings is a unique way of boosting your super by contributing more of your taxable income from employment and, if you need it, swapping all or part of this income with tax free super from a super pension.

Whether this strategy suits you will depend on your personal circumstances, such as your income level and age. In general, the best time to consider it is when you are above 60, when you want to give your super a pre-retirement savings boost, and you qualify for tax-free withdrawals from your super fund.

If you want to know more about this strategy, I suggest you read a useful fact sheet Ease yourself into retirement that you will find on this website and refer to the fact sheet on making a salary sacrifice contribution and what this involves.  

The views and opinions expressed in this article are those of the author and do not purport to reflect the views and opinions of Russell Investments.

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