The too good to be true role

The exception to the too good to be true rule

We all know the old adage, if it seems too good to be true, it probably is!  This is almost always the case; however, in Financial Planning we have an exception, the Transition To Retirement (TTR) income swap strategy.

The Transition to Retirement (TTR) income swap strategy is an extremely popular and powerful pre-retirement strategy that involves using superannuation to swap fully taxable income with tax free income. Unlike most strategies that we employ where it is necessary to forego something to obtain a benefit, the TTR is all gain with no draw-back.

So how does it work? Well, about a decade ago the government introduced legislation that allowed pre-retirees to access up to 10% of their superannuation balance whilst they continued to work. The theory behind this was that it enabled them to transition into retirement by reducing work hours and supplementing their reduced income with money from superannuation.

In order to access these funds, money is transferred from superannuation to a non-commutable allocated pension. These are now also known as Transition to Retirement Pensions. For those over 60, the income received from the TTR Pension is tax free.

This legislation also provided an opportunity for what is known as the income swap strategy. Those who continue to work full-time can also access up to 10% of their superannuation - this results in a cash-flow surplus.

If this cash-flow surplus is salary sacrificed into superannuation, there will be no income tax payable on these funds, and instead only contributions tax will be payable. Assuming the clients marginal tax rate is higher than 15%, this will result in a significant tax saving.

In the above scenario, the net income remains unchanged; however we have reduced the income tax payable by swapping taxable income for non-taxable income. The tax savings accumulate within superannuation, increasing the end balance at retirement.

It still amuses me how often clients ask “is it legal?”, which I understand, it does seem too good to be true.

Once you reach 60, if you are continuing to work, it really is advisable to speak to a Financial Advisor in relation to Transition to Retirement. For most people, adopting this strategy is likely to increase retirement savings significantly.


Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services


  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State


  • University of Western Sydney
  • Penrith High


As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

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