Transition to retirement with Gold State Super

With a transition to retirement strategy, you can receive a regular income from your super while you’re still working.

Once you’ve turned 55, you can access your super to start a regular pension, such as our Transition to Retirement Pension. This type of pension is known as a ‘non-commutable income stream’ because it doesn’t allow lump-sum withdrawals while you’re working.

There are a number of ways you can use transition to retirement to benefit you. You might:

• Increase your super - you'll continue to work and can sacrifice some of your salary to super
• Reduce your hours - you can work less without reducing your overall income, as your pension can make up for your lower salary
• Increase your income - you'll be receiving an income stream from a pension as well as your normal salary

You can find the right balance to suit your needs, with the flexibility to change your strategy. We recommend that you speak with a financial adviser, accountant or tax adviser to help you decide if transition to retirement is right for you.

Gold State Super is a scheme unlike most other super funds. If you would like to discuss your options, you might like to consider our Retirement Options Service for information tailored to your situation.

Read the case study below to find out how transition to retirement works with Gold State Super.

Meet Harry, age 60

• Harry has an annual salary of $100,000 and a Gold State Super benefit of $481,000
• He decides to transfer all but $1,000 of his super benefit to our Transition to Retirement Pension
• The taxable component - untaxed element of his benefit will be taxed at 15%¹ upon transfer because Gold State Super is an untaxed scheme
• If all of Harry’s benefit is untaxed, he will have a pension account balance of $408,000 after 15% tax has been deducted
• As Harry is 60, the income he receives from his pension is tax free

Here are some examples of how Harry could use Transition to Retirement.

Please note: All examples and scenarios used on this page are for illustrative purposes only. The figures in the calculations are for the 2023/24 financial year.

Option 1. Harry could increase his super

If Harry doesn’t need the extra income, he could take advantage of tax benefits to increase his super in preparation for retirement.

Harry chooses the maximum annual income of 10% of his pension account balance, and receives $40,800 in the first year.

He continues to work full time, while sacrificing $60,000 of his salary to his West State Super account, reducing his taxable income to $40,000.

In general, any contributions to Gold State Super above the maximum Average Contribution Rate of 5% can only be made to GESB Super or an existing West State Super account.

Please note:
Concessional contributions to constitutionally protected funds like Gold State Super and West State Super count towards your concessional contributions cap, but are not capped within those schemes. Instead there is an untaxed plan cap of $1.705 million per super fund for the 2023/24 financial year (indexed annually), which limits the untaxed benefit that can be paid to you or rolled over, and still be subject to concessional tax treatment. For more information see the Gold State Super essentials brochure.

By not changing his working arrangements and salary sacrificing to his West State Super account, Harry has contributed $60,000 into this account, while only reducing his pension account by $40,800.

As a result, Harry has increased his net contribution to super by $19,200 (that’s $60,000 minus $40,800) in the first year, while raising his net annual income by $1,110.

The net contribution doesn’t take into account that tax will apply on the salary sacrifice amount when Harry accesses the money.

Find out more about salary sacrifice.

Option 2. Harry could reduce his working hours

Harry decides to work part time and receive the maximum annual income payment (10% of his pension account balance). For the first year, Harry will receive $40,800.

By reducing his work hours and receiving $40,800 from his pension, Harry has increased his net income by $8,300 in the first year.

However, his pension account has decreased by 10% from the income payments.

In this example, Harry hasn’t increased his super by salary sacrificing. However, his contributions to his Gold State Super account will start building his super again. The amount of these contributions will be less due to his lower salary.

Option 3. Harry could increase his income

Harry continues to work full time. He chooses the maximum annual income payment (10% of his pension account balance). In the first year, Harry will receive $40,800 from his pension.

By not changing his working arrangements, Harry has increased his net income by $40,800 in the first year.

Although Harry’s pension account has been reduced by 10%, his contributions to his Gold State Super account will start building his super again.

1 Amounts up to the untaxed plan cap of $1.705 million per super fund (for the 2023/24 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $5,000 rounded down) are taxed at 15% on entry to a taxed fund. Any amount over the untaxed plan cap will be taxed at 47% before being rolled over. Concessional contributions to West State Super are not capped, but they count towards your cap when making these contributions to a taxed scheme.
2 Salary packaged into West State Super. West State Super is an untaxed scheme which means the salary sacrifice amount is not taxed until the benefit is accessed.
3 As John is aged 60, his income from an allocated pension is tax free.
4 Includes the low income tax offset of $575.
5 Calculated as taxable income less tax (i.e. $40,000 - $4,367 = $35,633), plus Transition to Retirement Pension income ($40,800).
6 Includes the low income tax offset of $250.
7 Calculated as taxable income less tax (i.e. $50,000 - $7,467 = $42,533), plus Transition to Retirement Pension income ($40,800).
8 Calculated as taxable income less tax (i.e. $100,000 - $24,967 = $75,033), plus Transition to Retirement Pension income ($40,800).