What is transition to retirement?
to retirement measure allows people who have reached their preservation
age, to have access to their superannuation benefits without having to
retire or leave their job. This measure allows people to access their
superannuation savings by drawing down certain non-commutable
superannuation income streams called transition to retirement income
From 1 July
2007, new rules apply to transition to retirement income streams.
which commenced before 1 July 2007 and that complied with the transition
to retirement rules at the time are deemed to satisfy the new requirements
and may continue to be paid under the former rules.
on transition to retirement income streams that commenced before 1 July
Transition to retirement - information for superannuation professionals
(NAT 15258, PDF, 107KB)
How does an income stream qualify as a transition to retirement income?
retirement income streams commencing on or after 1 July 2007 must satisfy
the following requirements:
A. It must be
an account-based income stream. This means an account balance must be
attributable to the recipient of the income stream.
B. The payment
of a minimum amount to be made at least annually - currently 4% of the
account balance where the member is under age 65.
C. The total
payments made in a financial year must be no more than 10% of the account
balance (at the start of each year). This is the maximum amount of income
stream benefits that can be drawn down each year.
on the commutation of the income stream (except in limited circumstances).
E. There is no
provision made for an amount or percentage to be left over when the income
F. The income
stream can be transferred only on the death of the member to one of their
dependants, or cashed as a lump sum to a dependant, non-dependant or the
G. The capital
value of the income stream and the income from it cannot be used as
security for borrowing.
Are there any restrictions on commutation of transition to retirement
If a transition
to retirement income stream is commuted, the resulting lump sum benefit
cannot be taken in cash unless the member satisfies a condition of release
with a 'nil' cashing restriction (for example, retirement) or the purpose
of the commutation is to:
unrestricted non-preserved benefit
superannuation contributions surcharge liability
to a payment split under family law, or
payment can be made to give effect to a release authority or
transitional release authority.
What happens if a member retires after commencement of a transition to
retirement income stream?
If a member
retires or qualifies for another condition of release with a 'nil' cashing
restriction after the commencement of a transition to retirement income
stream, they may have the following options:
receive the income stream
income stream to purchase another income stream
income stream and take the resulting lump sum benefit in cash
income stream and roll it back into the superannuation system
available vary depending on the type of income stream that was taken and
the time since its commencement. Members should seek advice from their
superannuation fund about whether they will provide all of these options.
Can self managed superannuation funds pay a transition to retirement
A self managed
superannuation fund may pay a transition to retirement income stream,
provided the trust deed of the fund allows this type of income stream to
be paid. If you are a trustee and you need more information, talk to your
financial or tax professional.
If a member
continues to work and receive superannuation benefits from your fund at
the same time, your fund may also be accepting contributions such as
superannuation guarantee payments on behalf of the member. There should be
two accounts to make this arrangement work - one for paying benefits and
the other for receiving contributions.
Is there a cap on the amount of superannuation that can be accessed by
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.
discuss this issue with their superannuation fund as funds will have their
Do superannuation funds have to offer non-commutable income streams?
It is not
compulsory for superannuation funds to offer their members transition to
retirement income streams.
Do members have to declare their transition to retirement income on their
If a member is
aged 60 or over, and the transition to retirement income stream is paid
from a taxed source, the member does not have to declare their transition
to retirement income on their income tax return.
If the member
is between preservation age and 60 years, or if the transition to
retirement income stream is paid from an untaxed source, the member will
need to declare the taxable component of the income stream on their income
The member does
not have to advise their employer that they are receiving a transition to
retirement income stream nor do they have to advise their superannuation
fund that they are receiving employment income. However, the member will
need to decide from which payer they wish to claim the tax free threshold.
If the client claims the tax free threshold with both payers, they may end
up with a tax liability at the end of the income year.
Australian Taxation Office
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