The 2016 budget also announced a proposal to alter the tax treatment of Transition to Retirement (TTR) Pensions. The proposal involves treating the fund earnings of a TTR the same as an accumulation account from 1 July 2017, which means that fund earnings will be taxed at 15%, instead of the current 0%.

Many people currently running a TTR are working full time and salary sacrificing income and replacing that with tax effective superannuation income and at the same time putting the fund into a tax free environment.

This proposal effectively re-aligns a transition to retirement pension back to its original objective, to enable a superannuation member who has met preservation age to reduce employment earnings and supplement this with a partial drawing from superannuation, by removing part of the tax arbitrage.