Transition to Retirement in 2026: When TTR Still Works After the 2017 Tax Change
TTR was close to a default pre-retirement move for many Australians aged 60 or over from 2005 to 2017. Then on 1 July 2017 the tax rules changed. The strategy didn’t disappear, but it stopped being a no-brainer — here is when it still works and when it doesn’t, from Canberra advisers who specialise in Commonwealth and Defence super.
I’m Maciej Stanek, Senior Financial Adviser and Director at Véurr Financial Planning. TTR still comes up often with Canberra pre-retirees, but the conversation looks different from a decade ago: for some clients it’s still a clear win; for others the 2017 change has tipped the strategy into costing more than it saves. The honest answer to “should I start a TTR pension?” is that it depends on your situation and the maths needs proper modelling. This guide walks through what TTR is, how the 2017 change reshaped it, when it still works in 2026, and the framework Imran and I use to decide.
What transition to retirement actually is
Transition to retirement (TTR) lets you draw a pension from your super while still working, once you’ve reached preservation age. You split your super in two: one pot stays in accumulation and keeps receiving contributions; the other moves into a transition to retirement income stream (TRIS) that pays regular income. In 2026, preservation age is 60 for every Australian — the phase-in for people born between 1 July 1960 and 30 June 1964 has now concluded. A TRIS stays a TRIS until you meet a condition of release (typically full retirement, age 65, or another nil-cashing-restriction trigger), then converts to a retirement-phase pension. Three rules constrain it: draw at least 4% of the balance per financial year, no more than 10%, and no lump-sum withdrawals until a condition of release is met.
The ATO’s TRIS page has the authoritative technical detail. What follows is how those rules translate into a decision for the people Imran and I see — Commonwealth public servants, Defence Force members, and Canberra pre-retirees bridging the last few years before full retirement.
The 2017 tax change in plain English
Before 1 July 2017, fund earnings on TRIS assets were taxed at 0% — the same tax-free treatment as a full retirement-phase pension — and that exemption made TTR a near-default move for many high earners in their early 60s. From 1 July 2017, earnings on TRIS assets not yet in retirement phase are taxed at 15% (the accumulation rate), and the change applied to every TTR pension regardless of when it commenced. The other half of the strategy survived intact — supplementing income from super so you can salary-sacrifice wages back at the 15% contributions rate — as did tax-free pension payments from age 60 and the 4–10% drawdown limits. What changed is that the strategy now carries a built-in cost (the 15% fund-earnings tax) to weigh against the salary-sacrifice benefit. Whether the maths still favours TTR depends entirely on the specifics.
A TTR pension paying 0% tax on its assets on 30 June 2017 was paying 15% the next day. The table below summarises what changed — and what didn’t.
TTR fund earnings tax — before and after 1 July 2017
| Element | Pre-1 July 2017 | 1 July 2017 onwards |
|---|---|---|
| Fund earnings on TRIS assets | 0% (tax-exempt) | 15% (same as accumulation) |
| Pension payments to member age 60+ | Tax-free | Tax-free (unchanged) |
| Pension payments to member under 60 | Taxable income less 15% offset | Taxable income less 15% offset (unchanged) |
| 4–10% min/max drawdown | Applied | Applied (unchanged) |
| Practical effect on strategy | Often a clear net benefit | Depends on the specifics — calculation needed each time |
When TTR still works in 2026
Three scenarios are where I most often see the maths still favour a TTR pension in 2026. First, reducing work hours and replacing lost income from super — the 15% fund-earnings tax barely matters, because the alternative (leaving assets in accumulation) is already taxed at 15%, and pension payments are tax-free from 60. Second, salary-sacrifice optimisation — you have meaningful concessional-cap headroom, you’re in a high marginal bracket (30%, 37%, or 45%), and the marginal-rate differential outweighs the 15% TRIS earnings drag. This is the genuinely close calculation that needs proper modelling; small changes in assumptions can flip it. Third, bridging to a known full-retirement date 2–3 years away — the cumulative drag is small and the TRIS converts to a retirement-phase pension (0% earnings tax) at the endpoint. Outside these patterns, the strategy needs careful per-client modelling first.
When TTR does not work in 2026
The 2017 change wiped out a category of TTR users where the 15% fund-earnings drag now outweighs the salary-sacrifice benefit. Four patterns recur in my Initial Meetings. Under preservation age (60 in 2026) — TTR isn’t legally available. Defined-benefit-scheme members (CSS, PSS, DFRDB, MSBS) without a separate accumulation balance large enough for 4–10% drawdowns to produce meaningful income — the strategy has nowhere to draw from. Anyone whose concessional cap is already absorbed by employer contributions — the salary-sacrifice optimisation depends on unused headroom (this catches high-earning APS members regularly). The modest-balance case — super of $100–200k generates only $4,000–$20,000 a year at the 4–10% limits, not enough to anchor a benefit larger than the drag. And in many cases the calculation simply lands near neutral, where leaving super in accumulation is the simpler, equally-effective choice. The post-2017 default is “model the actual numbers”, not “assume it’s worth doing”.
The decision framework Imran and I walk clients through
When a client asks “should I start a TTR pension?”, we work through five questions in order, each able to rule the strategy in or out before the next.
- Preservation age. Under 60 in 2026, TTR isn’t available.
- The income gap, if any. Bridging part-time income is TTR’s simplest use case; with no gap, it’s purely a salary-sacrifice optimisation, the more sensitive calculation.
- Concessional-contribution capacity. The headroom under the cap not already used by employer contributions (CSS, PSS and PSSap all count toward it differently).
- Your marginal tax rate. The salary-sacrifice mechanic captures the gap between it and the 15% contributions tax — 15 points at the 30% bracket, 30 points at 45%, so higher-rate earners come out further ahead.
- Net cumulative position. The 15% TRIS fund-earnings drag over the strategy’s lifetime, weighed against the cumulative salary-sacrifice benefit. Positive and material, TTR works; otherwise it doesn’t.
No rule of thumb replaces the calculation.
How TTR interacts with CSS, PSS, and PSSap
The three main Commonwealth schemes treat TTR very differently, and this catches public servants out regularly. CSS members can access TTR via an Account Based Pension (talk to your financial adviser about setting up a suitable product) once they’ve reached preservation age and have at least $20,000 to commence the TRIS — running alongside the separate CSS defined-benefit pension. PSS has no native TTR pathway: a PSS member needs a separate accumulation balance (prior employment or savings) substantial enough to be worth running, while the PSS defined benefit keeps accruing. PSSap launched an account-based pension that supports TTR for eligible members, with the same considerations as general accumulation-fund members. For all three, the TTR decision is separate from the bigger scheme decisions — pension commencement, lump sum vs pension, retirement timing — which carry their own trade-offs.
For full detail on the three schemes and which decisions matter when, see our complete guide to financial planning for Australian public servants.
How TTR interacts with DFRDB, MSBS, and ADF Super
The Defence schemes follow the same pattern — TTR availability depends entirely on which scheme you’re in. DFRDB (closed to new entrants 1 October 1991) is pure defined benefit with no native TTR product; a member who wants TTR needs a separate accumulation balance to draw from, and the big DFRDB decision (commutation at separation) is unrelated to TTR. MSBS (closed 2016) is a hybrid with a defined-benefit pension plus an accumulation member-contribution component; TTR isn’t available directly during service, though that component can feed an account-based pension supporting TTR after separation. ADF Super (opened 1 July 2016) is an accumulation fund, so serving members past preservation age can start a TTR via an account-based pension — the most direct pathway for serving Defence members today, subject to the same 2017 considerations as any accumulation-fund TTR.
For DVA-entitled veterans, the interaction between DVA payments, super income (including any TRIS), and broader retirement income is its own complexity — Imran’s depth in the Defence schemes covers it. For the full picture see our DFRDB, MSBS and ADF Super guide.
High-balance considerations: TTR and Division 296
For pre-retirees at or approaching the proposed Division 296 threshold, TTR has to be considered alongside another tax layer. The proposed Division 296 tax (an additional 15% on super earnings attributable to balances above a high threshold) would apply to the member’s total super balance, including amounts in a TRIS. That doesn’t make TTR unworkable, but the combined 15% TRIS fund-earnings tax plus a potential 15% Division 296 charge on earnings above the threshold has to be weighed against the salary-sacrifice benefit and the time to retirement-phase conversion. For some high-balance clients the answer is to keep the TTR strategy small enough that it doesn’t pull the total-super-balance trajectory across a threshold.
For the full picture on Division 296 — which balances are affected, what the proposed mechanism does, and how planning conversations have shifted as the legislation has progressed — see our Division 296 super tax explainer.
How TTR affects the Age Pension from Centrelink
For clients close to Age Pension eligibility, TTR has an often-overlooked Centrelink dimension. Services Australia treats a TRIS as a financial asset: the income test deems a return on the account balance (not the actual payment), and the assets test counts the full balance — so a TRIS doesn’t shield super from means testing the way some assume. Crucially, the comparison depends on your age. At or above Age Pension age, super left in accumulation is also deemed and assessed — so there, TTR-versus-stay-in-accumulation makes no material Centrelink difference, and the only thing separating the two paths is the in-fund tax treatment. Below Age Pension age it is a different story: super in accumulation is not assessed at all, while a TRIS is (its balance under the assets test, deemed income under the income test). So for an under-Age-Pension-age client who is means-tested — on a working-age payment, or partnered with someone on the Age Pension — starting a TRIS can convert previously exempt super into an assessed asset and cut that payment. That is a real TTR trap. Where Age Pension is in the mix, model it against the live deeming rates and thresholds before you commence.
For a broader treatment of how retirement-income decisions interact with Centrelink, see our retirement planning in Australia guide.
Frequently asked questions about TTR
Can I still start a TTR pension in 2026?
Yes — TTR is still available, the 2017 tax change didn’t remove the strategy. It just removed the 0% fund earnings tax on TRIS assets. Whether starting a TTR pension is the right move depends on your specific situation: your age, income, marginal tax rate, super balance, contribution-cap headroom, and how long until you fully retire. The strategy still works clearly in some scenarios and clearly doesn’t in others.
What’s the difference between a TRIS and a retirement-phase pension?
A TRIS (transition to retirement income stream) is paid from your super while you’re still working and haven’t met a condition of release. A retirement-phase pension is paid after you’ve met a condition of release — typically full retirement, reaching age 65, or another nil-cashing-restriction trigger. The key practical difference is that fund earnings on TRIS assets are taxed at 15% (since the 2017 change), whereas fund earnings on retirement-phase pension assets are taxed at 0% (subject to the Transfer Balance Cap). A TRIS automatically converts to a retirement-phase pension when you meet a condition of release.
Do I have to take a TTR pension if I’m over 60 and still working?
No. TTR is an option, not an obligation. If you don’t need supplemental income and the salary-sacrifice optimisation maths doesn’t work in your situation, leaving your super in accumulation phase is often the simpler and equally tax-effective choice. The default-to-TTR approach that made sense pre-2017 doesn’t apply in 2026. Each pre-retiree’s situation needs its own modelling before deciding.
Does TTR affect my Centrelink Age Pension?
It can, yes — and whether it differs from leaving the balance in accumulation depends on your age. Services Australia treats a TRIS as a financial asset: its balance counts toward the assets test and deemed income counts toward the income test, with actual payments not separately counted. At or above Age Pension age, accumulation super is assessed the same way, so there is usually no difference. But below Age Pension age, accumulation super is not assessed at all while a TRIS is — so if you are means-tested before Age Pension age (for example, on a working-age payment, or as the partner of someone on the Age Pension), starting a TRIS can reduce that payment. The practical effect depends on your full assets and income picture.
Can I run a TTR strategy in CSS or PSS?
CSS members can run a TTR strategy via an account-based pension — that’s the standard pathway. PSS doesn’t offer a native TTR product, so PSS members would need an accumulation balance held separately. PSSap launched an account-based pension that supports TTR for eligible members. For all three schemes, the TTR decision is separate from the bigger scheme decisions about pension commencement, lump sum vs pension, and timing of retirement.
Want to know if TTR is right for your situation?
The Initial Meeting is complimentary — about 45–60 minutes, no obligation. Maciej and Imran will work through whether TTR is worth modelling for your situation, what the broader retirement-income decisions look like, and whether specialist advice would help. If you’re a CSS, PSS, PSSap, DFRDB, MSBS, or ADF Super member, we work with your scheme every week.
Book your complimentary Initial Meeting
Or call us directly: (02) 6171 1777
Sources and further reading: ATO — Transition to retirement income streams · ATO — Transition to retirement (individuals) · Moneysmart — Transition to retirement · Services Australia — Income test for Age Pension · ASIC Financial Advisers Register
