Transition to retirement: what a TRIS actually does — and doesn't — in 2026

For Australians thinking about easing into retirement gradually rather than stopping work in one step, the Transition to Retirement Income Stream — universally known as a TRIS — has long been part of the planning toolkit. It lets someone who has reached preservation age draw a regular income from their superannuation while still working, without needing to fully retire first. What the strategy actually achieves today, however, has changed significantly since 2017, and many Australians who first heard about TRIS in the early 2010s are working from an outdated picture.

Preservation age — the age from which you can access superannuation in this way — is currently 60 for anyone born on or after 1 July 1964 (SIS Act s 62A; ATO, Transition to retirement, ato.gov.au). Once you have reached preservation age, you can commence a TRIS from part or all of your super balance, receive regular income from it, and leave the balance invested in your chosen fund option.

While a TRIS remains in its pre-retirement phase — meaning you have not yet met a full condition of release such as retiring or turning 65 — two rules apply that do not apply to a standard retirement-phase account-based pension. First, there is a maximum annual drawdown of 10% of your account balance. You can draw as little as the standard minimum (4% for those under 65, rising with age) but no more than 10%. Second, fund earnings inside the TRIS are taxed at 15% — the same rate as the accumulation phase (ITAA 1997 s 295-385, as amended effective 1 July 2017; ATO, Transition to retirement, ato.gov.au). Pension payments drawn by a member aged 60 or over remain tax-free — that part of the TRIS tax treatment is unchanged. It is only the earnings inside the fund that are taxed at 15%.

This distinction matters because of what changed on 1 July 2017. Before that date, fund earnings inside a TRIS were tax-free — zero percent, the same as a retirement-phase pension. That feature is what made the TRIS famous. The classic strategy was to salary-sacrifice a large portion of income into super (gaining the 15% concessional contribution rate rather than paying marginal rates), simultaneously draw tax-free pension payments from a TRIS to replace the forgone take-home income, and have the super balance earn returns entirely tax-free. The net effect, for many earners, was a meaningful reduction in tax while super grew faster.

From 1 July 2017, that inside-the-fund tax advantage was removed. TRIS earnings now attract 15% tax, just like accumulation. The member still receives tax-free pension payments, and the salary-sacrifice benefit is still real — but the compound effect of tax-free earnings inside the structure is no longer there. For many pre-retirees, the cleaner path today is to salary-sacrifice directly into super during working years, then commence a retirement-phase account-based pension — with genuinely tax-free fund earnings — once they retire or turn 65.

For some high-marginal-rate earners, a salary-sacrifice-plus-TRIS arrangement still produces a net benefit even under the post-2017 rules. Whether it does depends on the gap between their marginal tax rate, the concessional contribution rate, and the fund's earnings profile. The calculation is worth doing with current numbers — not assumed to work based on a pre-2017 rule of thumb.

The simplest and often most overlooked use for a TRIS has nothing to do with tax optimisation. A 62-year-old who wants to reduce from full-time to three days per week faces an income drop of roughly 40%. Commencing a TRIS to top up their reduced salary — drawing tax-free pension payments to maintain their overall cash position — is a straightforward cash-flow strategy that works well regardless of the 2017 changes. No salary-sacrifice complexity required.

When a TRIS holder meets a full condition of release — retiring after preservation age, reaching age 65, or ceasing an employment arrangement after age 60 — the TRIS converts from pre-retirement phase to retirement phase. Once in retirement phase, the 15% earnings tax disappears and fund earnings become tax-free. The 10% maximum drawdown limit also disappears. This conversion is, however, not always automatic in practice. The legislative trigger occurs when the condition of release is met, but in many cases the member needs to notify their super fund and have the conversion processed. Until it is, the fund continues taxing earnings at 15% — even if the member has technically retired. If you hold a TRIS and have either retired or turned 65 since you commenced it, it is worth confirming with your fund that the conversion has been made and the earnings tax removed.

For members at Age Pension age, a TRIS balance is included in the assets test and the TRIS is assessed under the income test through deeming — Services Australia applies a standard notional rate to the TRIS balance to calculate assessed income, rather than counting actual pension payments (DSS Social Security Guide section 4.4.1.10, current deeming rates 1.25% on the first $106,200 of combined financial assets for a pensioner couple, 3.25% above that, effective 20 March 2026). For members below Age Pension age, the TRIS balance is generally not assessed for Centrelink purposes — though circumstances vary.

The most useful questions to ask about a TRIS arrangement are simple ones: Is it still in pre-retirement phase when it should have converted? Was it started for the pre-2017 tax advantage that no longer applies in full? And for anyone beginning to think about reducing work hours — is a TRIS the right tool for bridging the income gap, or would commencing a full retirement pension after ceasing work be simpler and more tax-efficient? These are questions worth working through with a licensed financial adviser who can model the specific numbers.

Sources

• Australian Taxation Office (ATO) — Transition to retirement
• DSS Social Security Guide 4.4.1.10 — Overview of deeming
• DSS Social Security Guide 4.9.2.10 — Income streams