What is the preservation age for a TTR pension in Australia in 2026?

In Australia, the preservation age is 60 for anyone born on or after 1 July 1964. Since virtually everyone in the workforce turning 55–64 is now covered by the 60-year threshold, you must have reached age 60 before you can start a transition to retirement (TTR) pension. Prior to 2024, the preservation age was 55 for some cohorts, but that phase-in period is now complete.

How much can I draw from an Australian TTR pension each year?

In Australia, SMSF and public-offer fund trustees must pay a minimum annual TTR pension equal to the standard minimum pension drawdown percentage based on your age (4% of the account balance for those under 65 in 2025-26). A maximum of 10% of the account balance per year also applies. Unlike an account-based pension (ABP), you cannot draw more than 10% annually from a TTR pension until you meet a full condition of release.

Is income from an Australian TTR pension taxed?

For Australians aged 60 and over, TTR pension payments are received completely tax-free. For those aged under 60 (not currently applicable since preservation age is 60), a 15% tax offset would apply to the taxable component. From a 2026 perspective, essentially all TTR pension recipients are aged 60+ and receive payments tax-free.

Do SMSF earnings remain taxed during an Australian TTR pension?

Yes. Unlike a retirement phase account-based pension where earnings are tax-free, a TTR pension account in an SMSF or retail fund continues to pay the standard 15% tax on fund earnings. The TTR account does not move to the tax-exempt retirement phase until the member meets a full condition of release (typically full retirement or reaching age 65). This is a key distinction that affects the overall tax benefit of the TTR strategy.

Can I use a TTR strategy in an Australian SMSF?

Yes. An SMSF is one of the most popular vehicles for implementing a TTR strategy in Australia, as it gives members direct control over pension payments and investment decisions. The SMSF trust deed must permit TTR pensions (most modern deeds do), and the fund must maintain separate accounting for the TTR pension account. The ATO requires the minimum pension to be paid each year or the fund may face compliance issues.

What happens to my Australian TTR pension when I retire fully?

When you meet a full condition of release (such as retiring after reaching preservation age, turning 65, or becoming permanently incapacitated), your TTR pension automatically converts to a retirement phase account-based pension (ABP). At that point, earnings in the fund become tax-exempt, subject to the transfer balance cap of $1.9 million (rising to $2.1 million from 1 July 2026). Any balance above the cap must remain in accumulation phase.

Transition to Retirement (TTR) Pension Strategy: The Complete 2026 Guide for Australians

What Is a Transition to Retirement Pension?

A transition to retirement (TTR) pension allows Australians who have reached their preservation age to access part of their superannuation while they are still working. Introduced on 1 July 2005, it was designed to give older workers flexibility, either by reducing working hours without taking a pay cut, or by using a salary sacrifice strategy to reduce tax and boost super simultaneously.

In 2026, with Australia’s preservation age fixed at 60, the TTR pension is most relevant for workers aged 60 to 64 who haven’t yet fully retired. Once you reach 65, or if you retire earlier, you can access a standard retirement phase account-based pension (ABP) instead, which is generally more advantageous.

The Two Main Reasons People Use TTR

Reduce working hours without reducing income. You draw pension payments to supplement your reduced salary, maintaining your lifestyle while easing back from full-time work.
Tax-minimisation strategy. You salary sacrifice more of your pre-tax salary into super, reducing income tax, and simultaneously draw tax-free TTR pension payments to replace that income. The net effect is higher super contributions and lower tax, with similar take-home pay.

The second strategy remains the primary reason financial advisers recommend TTR to clients aged 60 to 64 who want to maximise superannuation before retirement.

How the Salary Sacrifice + TTR Strategy Works

The TTR tax strategy is most effective when you are aged 60 or over and on a mid-to-high marginal tax rate. Here’s how it works step by step.

Step 1: Start a TTR Pension Account

You split part of your superannuation balance (or all of it, if using an SMSF) into a TTR pension account. The pension account begins paying you regular income.

Step 2: Increase Salary Sacrifice Contributions

You arrange with your employer to salary sacrifice more of your income into superannuation. These contributions are taxed at 15% inside the super fund, rather than at your marginal rate (up to 47% including the Medicare levy for high earners).

Step 3: Replace the Sacrificed Income With Tax-Free Pension Payments

The TTR pension payments you receive, if you are 60 or older, are completely tax-free. You maintain roughly the same take-home pay, but a larger portion of your income is now flowing through the super system at 15% rather than your marginal rate.

The Numbers: A Worked Example

Factor	Without TTR	With TTR Strategy
Gross salary	$120,000	$120,000
Salary sacrifice	$5,000 (SG only)	$25,000
Taxable salary	$115,000	$95,000
Income tax + Medicare (approx.)	$30,917	$23,717
TTR pension drawn	$0	$15,000 (tax-free)
Effective take-home pay	$84,083	$86,283
Super contribution (concessional)	$5,000	$25,000
Tax on super contributions (15%)	$750	$3,750
Net additional super per year	—	~$17,000 more

Figures are indicative only and assume 2025-26 tax rates. Individual results will vary based on personal circumstances.

In this example, the worker using a TTR strategy ends up with more take-home pay and an additional $17,000 in superannuation per year, simply by restructuring how their income flows.

Key Rules and Limits in 2026

Preservation Age

In 2026, the preservation age is 60 for all Australians. The phase-in period that applied to cohorts born between 1 July 1960 and 30 June 1964 has now concluded.

Minimum and Maximum Drawdown

The ATO requires TTR pension accounts to pay at least the minimum drawdown each financial year. For 2025-26, the minimum annual payment as a percentage of account balance is:

Age	Minimum Drawdown (%)
Under 65	4%
65 to 74	5%
75 to 79	6%
80 to 84	7%
85 to 89	9%
90 to 94	11%
95 or older	14%

Importantly, the maximum annual TTR pension payment is capped at 10% of the account balance each year. If you need more than 10% in income, a standard ABP or other structure may be more appropriate.

Concessional Contribution Cap

The concessional contribution cap (including employer SG and salary sacrifice) is $30,000 per year in 2025-26, rising to $30,000 in 2026-27 (no indexation announced at time of writing). For those with a total super balance under $500,000, unused concessional cap amounts from prior years can be carried forward under the catch-up contributions rule.

Earnings Tax During TTR Phase

A critical rule: while your TTR pension account is paying you, the earnings inside the fund are still taxed at 15% (the accumulation rate). The fund does not move into the tax-exempt retirement phase until you meet a full condition of release.

For SMSFs with both TTR and accumulation accounts, careful segregation or actuarial calculations are required to correctly apply the different tax rates to each pool of assets. Getting this wrong can create compliance problems.

TTR in an SMSF vs a Retail Fund

SMSF Advantages

Self-managed super funds offer the most flexibility for TTR strategies:

Direct control over investment decisions and pension payment timing
Ability to segregate retirement and accumulation assets for cleaner tax treatment
Property and direct shares can be held and managed to align with your retirement strategy
Death benefit nominations and estate planning considerations can be addressed within the same structure

The downside is cost and complexity. SMSF running costs typically range from $2,500 to $6,000+ per year, so the fund needs a sufficient balance (generally $250,000 or more) to justify the expenses.

Retail and Industry Fund TTR

Most major industry and retail super funds offer TTR pensions for members who have reached 60. The process is simpler, the admin is handled by the fund, and there are no separate trustee obligations. However, you have less control over timing, investment allocation within the TTR account, and payment frequency.

When the TTR Strategy Works Best

TTR is not a one-size-fits-all strategy. It works best when:

You are aged 60 to 64 (tax-free pension payments, below full retirement age)
Your marginal tax rate is 34.5% or higher (the 32.5% bracket plus Medicare, which applies to income over $45,000)
Your super balance is sufficient to generate meaningful pension payments (typically $200,000 or more in the TTR account)
You have capacity to salary sacrifice without breaching the $30,000 concessional cap
You are not yet ready to fully retire but want to accelerate super accumulation

For those already over 65, the TTR rules no longer apply and a standard account-based pension with tax-exempt earnings is available.

Pitfalls to Watch For

Exceeding the Concessional Cap

Salary sacrifice contributions plus your employer’s Superannuation Guarantee (SG) contributions must not exceed $30,000 per year. For employees with a $120,000 salary, the SG alone contributes $12,000 (at 11.5% for 2025-26, rising to 12% from 1 July 2026), leaving headroom of $18,000 for salary sacrifice. Exceeding the cap triggers excess concessional contributions tax at your marginal rate.

Not Paying the Minimum Pension

SMSF trustees must ensure the minimum TTR pension is paid each year, including making at least one payment per year. If the minimum isn’t paid by 30 June, the pension is deemed to have failed, and the fund loses its exempt status for that account for the entire year, which can trigger a significant tax liability.

Centrelink and TTR Payments

TTR pension payments do not count as a superannuation lump sum or as work income for Centrelink purposes. However, if you receive any Centrelink payments (including the Age Pension), TTR pension income will be assessed under the income test and may affect your entitlements. The assets test also applies to your TTR pension balance.

Division 296 Implications

If your total superannuation balance approaches $3 million, starting a TTR strategy could accelerate the growth of your super balance into the Division 296 threshold, where an additional 15% tax on super earnings will apply from 1 July 2026 (subject to Senate passage). High-balance members should factor this into their TTR modelling.

TTR vs Direct Retirement: A Comparison

Feature	TTR Pension (age 60-64)	Retirement Phase ABP (age 60+)
Fund earnings tax	15%	0%
Pension payments tax	Tax-free (age 60+)	Tax-free (age 60+)
Annual drawdown minimum	4%–14% by age	4%–14% by age
Annual drawdown maximum	10%	No maximum
Transfer balance cap applies	No (until conversion)	Yes ($1.9M, rising to $2.1M July 2026)
Access to lump sums	Limited (capped income stream)	Unrestricted once retired

The fund earnings tax difference is the key reason TTR is not always the most efficient strategy on its own. Where TTR outperforms is when the salary sacrifice tax saving more than offsets the 15% earnings tax in the TTR account. For most working Australians aged 60 to 64 on meaningful salaries, this calculation typically favours using TTR.

How to Get Started

Get advice first. TTR strategies involve tax law, superannuation law, and personal financial circumstances. ASIC requires personal advice on superannuation strategies to be provided by a licensed financial adviser (AFS licence holder). This is not a DIY area.
Review your super fund rules. Check your trust deed (if SMSF) or product disclosure statement to confirm TTR pensions are available.
Model the numbers. Your adviser or accountant should model the tax savings against the opportunity cost (15% earnings tax in TTR vs 0% in retirement phase).
Arrange salary sacrifice with your employer. A salary sacrifice arrangement must be in writing before the income is earned. You cannot salary sacrifice retrospectively.
Set up the TTR pension. Your SMSF trustee or retail fund will establish the pension account and commence regular payments.

Working With the Right Professionals

A TTR strategy sits at the intersection of tax, superannuation, and cash flow planning. You’ll likely need at least two professionals working together:

A licensed financial adviser to model strategy options, recommend the appropriate structure, and provide a Statement of Advice
An SMSF accountant or auditor (if using an SMSF) to manage the annual compliance, fund accounts, and actuarial certificates

Getting this right from the start means avoiding costly mistakes around minimum pension payments, concessional cap breaches, and incorrect fund tax treatment.

WealthWorks connects Australians with verified financial advisers, SMSF accountants, and retirement planning specialists. If you’re approaching 60 and want to make the most of the years before full retirement, find a verified professional who can model a TTR strategy for your specific situation.

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