Under the transition to retirement rules, if you have reached your preservation age, you may be able to reduce your working hours without reducing your income. You can do this by topping up your part-time income with a regular 'income stream' from your super savings.
Until recently, you could only access your super once you turned 65 or retired. This meant it was difficult to reduce your work hours and still maintain your standard of living. With the new rules, you can withdraw some or all of your super over into a retirement income stream. Then you can top up your reduced income by drawing on your super.
However, you must be aware of the impact this can have on you and your circumstances. Some parts of this measure are complex to understand, set up and maintain. We recommend you see a financial adviser, accountant or your tax agent to help you decide if this option is right for you.
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Retirement income streams are a popular investment choice for retirees. Retirement income streams are simply investments that give you regular income payments through your retirement. This helps you manage your income and spending.
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Under the transition to retirement rules you can only access your super benefits as a 'non-commutable' income stream. This generally means you cannot take your benefits as a lump sum cash payment while you are still working. You must take your super benefits as regular payments.
We recommend you:
- ask your super fund whether they offer non-commutable income streams
- seek financial advice to find out what is best for you.
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A non-commutable income stream is one that cannot be converted into a lump sum.
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It is not compulsory for super funds to offer you a non-commutable income stream.
If your fund doesn't offer an income stream which lets you take up the transition to retirement option, you may be able to choose a new super fund.
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For more information refer to choosing a super fund or phone 13 10 20. We recommend you also seek professional financial advice.
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Your preservation age is generally the age you are allowed to access your super benefits when you stop working.
The table below shows your preservation age. Once you reach your preservation age, you can access your super benefits without retiring completely from the workforce.
Table: Your preservation age depends on your date of birth
Date of birth
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Preservation age
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Before 1 July 1960
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55
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1 July 1960 - 30 June 1961
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56
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1 July 1961 - 30 June 1962
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57
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1 July 1962 - 30 June 1963
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58
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1 July 1963 - 30 June 1964
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59
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After 30 June 1964
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60
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Transition to retirement income streams are taxed in the same way as other income streams.
That means:
- if you've reached your preservation age and are less than 60 years old, the taxable part of your income stream will be taxed at your marginal tax rate. If your income stream is paid from a taxed source, you will also receive a tax offset equal to 15% of the taxable part of the income stream, and
- once you turn 60, your super income from a taxed source will be tax-free.
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For more information:
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There is no specific limit on the amount of superannuation benefits that may be drawn down under the transition to retirement measure other than the requirement that no more than 10% of the account balance, as at the start of the financial year, may be paid each year.
Members should discuss this issue with their superannuation fund as funds will have their own rules.
Employers still need to make compulsory super guarantee contributions for all their eligible employees.
For more information or to obtain copies of our publications:
- phone 13 10 20
- phone our publications distribution service on 1300 720 092.
Last Modified: Wednesday, 10 February 2010