For members of a self-managed super fund approaching or reaching 60, two income streams often get talked about in the same breath: a transition to retirement income stream (TRIS) and a full account-based pension. They look similar — both pay a regular income from super — but under the tax law they behave very differently. One lets you draw an income while still working, but its Earnings are taxed. The other belongs to the retirement phase, where fund earnings are tax-free but access is tied to genuinely leaving work or reaching a set age. Confusing the two can be costly, because the difference determines whether the SMSF pays 15% or 0% tax on the underlying Investment earnings. Here is how they compare.

 

What a TRIS is

A transition to retirement income stream is available from preservation age — now 60 for everyone — while a member is still working and before they have met a full condition of release. It lets a member draw down some super without retiring. A TRIS has firm payment limits: a minimum of 4% and a maximum of 10% of the 1 July Account Balance each year. It is also non-commutable, meaning the member cannot take arbitrary lump sums from it while it remains in the pre-retirement phase.

Crucially, since 1 July 2017 a TRIS in the pre-retirement phase is not in the retirement phase. Earnings on the Assets supporting it are taxed at 15%, the same as accumulation phase — not the tax-free 0% that applies to retirement-phase pensions. This is the single most misunderstood feature of a TRIS.

 

What an account-based pension is

A retirement-phase account-based pension is the mainstream SMSF pension. Its earnings — income and capital gains on the supporting assets — are Exempt Current Pension Income, taxed at 0%. Pension payments to a member aged 60 or over from a taxed fund are tax-free and do not need to be declared as income. There is a minimum annual drawdown (for example, 4% under age 65 and 5% from 65 to 74), but no maximum — a member can draw as much as they like, including lump sums, because a retirement-phase pension is commutable.

Because it sits in the tax-free retirement phase, an account-based pension counts towards the transfer balance cap, which limits how much a person can hold in that environment across all their super.

 

The tax difference, side by side

The contrast is stark. In an SMSF running a pre-retirement TRIS, the fund still pays 15% on the earnings of the assets backing that stream. In an SMSF running a retirement-phase account-based pension, those same earnings would be taxed at 0%. For a fund holding franked shares, the retirement phase can even deliver a full cash refund of excess franking credits, because there is no tax for them to offset. That is a meaningful annual difference on a sizeable balance, and it is the main reason members are keen to move from a TRIS into retirement phase as soon as they are eligible.

 

Who each one suits

A TRIS generally applies to someone who has reached 60 but is still working and not ready to fully retire — perhaps scaling back hours and supplementing salary with a super income. An account-based pension applies to someone who has met a full condition of release: retiring after 60, ceasing an employment arrangement on or after 60, or reaching 65. Some members use a TRIS as a bridge, then convert it to a full pension once they stop work or turn 65. These are general patterns, not recommendations.

 

How a TRIS converts to retirement phase

The good news for TRIS holders is that the switch to tax-free status is not a fresh application in most cases — it is triggered by an event. A TRIS moves to retirement phase once the member meets a full condition of release with a nil cashing restriction. That happens when the member retires after 60, ceases an employment arrangement on or after 60, or reaches age 65 (at which point it converts automatically), or otherwise notifies the fund that such a condition has been met.

At that point three things change: earnings on the supporting assets become tax-free ECPI (0%), the income stream starts counting towards the transfer balance cap, and the payment maximum of 10% falls away, leaving only a minimum. The general transfer balance cap was $2 million in 2025–26 and was indexed to $2.1 million from 1 July 2026, so members converting a TRIS need to check their personal cap has room.

 

Worked example (hypothetical)

Consider Trevor, a hypothetical SMSF member who turns 60 and keeps working three days a week. He starts a TRIS and draws 6% of his 1 July balance to top up his reduced salary. His SMSF continues to pay 15% tax on the earnings of the assets backing that TRIS. Three years later, at 63, Trevor ceases his employment arrangement. He notifies his fund, the TRIS converts to retirement phase, and from that day the earnings on those assets are taxed at 0% and his pension payments remain tax-free. The amount transferred counts against his personal transfer balance cap. This example is illustrative only and not personal advice.

 

Key Takeaway

A TRIS and an account-based pension differ most in tax. A pre-retirement TRIS is available from 60 while still working, pays between 4% and 10%, is non-commutable, and has earnings taxed at 15%. A retirement-phase account-based pension has earnings taxed at 0%, pays tax-free income from age 60, has only a minimum drawdown, and counts towards the transfer balance cap of $2.1 million from 1 July 2026. A TRIS converts to retirement phase when a full condition of release is met, including automatically at 65.