Transition to retirement – TRIS – explained

Simply put, a TRIS allows you to access part of your superannuation once you reach your preservation age (now 60 for most Australians), without having to fully retire. It means you can start drawing an income from your super while you’re still working. This creates flexibility. You might choose to:

• Reduce your working hours and supplement your income, or
• Continue working full-time, but restructure your finances to improve tax efficiency

The key idea here, and something we emphasise with clients, is that retirement doesn’t have to be a hard stop. It can be a transition.

To set up a TRIS, you move part of your super from your accumulation account into a pension account (the TRIS). From there, you draw a regular income. There are rules around how much you can withdraw:

• Minimum: 4% of your balance each year
• Maximum: 10% of your balance each year

This ensures your super continues to support your long-term retirement while still providing you with income now. It’s important to understand that while you’re still working:

• You generally can’t take lump sums (only income payments)
• Your super fund earnings are still taxed at 15% (not tax-free yet)

Once you fully retire or reach age 65, your TRIS typically converts into a full retirement pension. At that point, earnings on your super can become tax-free.

Having a sound and well-thought-out strategy is critical. One of the most effective ways to use a TRIS is through a “re-contribution” or “salary sacrifice” strategy. You draw an income from your TRIS while simultaneously contributing more of your salary into super. Why would you do this? Because:

• Super contributions are generally taxed at 15%
• Your personal income may be taxed at a higher marginal rate

So, you’re effectively shifting income from a higher-tax environment into a lower-tax one. At the same time, your employer continues making super contributions as normal, which helps keep building your balance.

That said, it’s not always about tax. For many clients, the biggest benefit is lifestyle, working less without sacrificing income.

When well set up, a TRIS can offer several advantages:

• Flexibility in your work life. You can reduce hours or responsibilities without a major drop in income.
• Improved cash flow. Your super helps replace part of your salary, giving you more control over your finances.
• Potential tax efficiencies. Strategically combining withdrawals and contributions can reduce your overall tax position.
• A smoother transition into retirement. You get time to adjust both financially and emotionally, rather than making a sudden change.

While a TRIS makes a lot of sense, it’s not suitable for everyone. Here are a few things you need to think about:

• Impact on your long-term super balance. Drawing income earlier means less compounding over time. If not managed carefully, it can reduce your retirement savings.
• Contribution caps. There are limits on how much you can salary sacrifice into super each year, so the strategy needs to be structured carefully.
• Tax changes and rules. Superannuation rules do change, and strategies that worked years ago may not deliver the same benefits today.
• Your retirement timeline. If you’re only a year or two away from full retirement, the benefit may be limited compared to someone planning a 5–10 year transition.
• Insurance inside super. Before moving funds into a pension account, it’s important to check whether it impacts any insurance cover you hold.

When discussing a TRIS with clients, we advise that it isn’t just a financial strategy; it’s a lifestyle strategy. It gives you options. Whether that’s working three days a week instead of five, or simply feeling more in control of your finances, identifying whether it is the most suitable option for your circumstances and having the right structure are essential.

If you’re approaching 60 and starting to think seriously about retirement, this is the perfect time to explore whether a Transition to Retirement strategy could work for you. Our team is here to help you implement it and show you how to take full advantage.

The team at First Financial comprises financial experts who help hundreds of Australians retire well and make informed, intelligent financial decisions. We cover everything from retirement and financial advice, investment and wealth management, superannuation and SMSF, insurance, tax, aged care, legal and lending services. Contact us for holistic, well-rounded financial management strategies.