Ceasing any employment after 60

stop working

If you recall from the page on superannuation account types, during your working life, your super is in an accumulation account, where earnings in that account are taxed at a concessional rate but are still taxed. When you reach a certain age, you can transfer your money across to an account-based pension, which has the following lucrative advantages:

  • zero tax on investment earnings (both income and capital gains)
  • zero tax on the income you receive (if you are over 60), and
  • zero tax on lump sum withdrawals.

So by moving your super to an account-based pension sooner than later, you can save large amounts of tax each year.

How much tax can you save with an account-based pension

Investments in an accumulation account are taxed at 15% on income, 15% on short-term capital gains, and 10% on long-term capital gains. Let’s say 12.5% to make the maths simple.

Let’s say you have $500,000 in super. An 8% expected return is $40,000 of annual earnings. Each type of account would be as follows:

Tax in an accumulation account: 12.5% x $40,000 = $5,000
Tax in an account-based pension account: 0% x $40,000 = $0

Converting to an account-based pension would mean saving $5,000 per year on a $500,000 balance, or 1% of your balance every year.

Adjust up or down based on your balance and return estimates. E.g., on a $1m balance, you could save $10,000 p.a.

Previously, a TTR pension was a good option here since it had tax-free earnings, but since that is no longer the case, an account-based pension does – and you can continue to contribute to super even after you convert to an account-based pension until you are 75 provided you are within the caps.

* Note that if you use an individually taxed structure such as an SMSF, wrap, or direct investment option, provided you don’t sell, any capital gains will not need to be paid regardless of whether you move to an an account-based pension sooner rather than later. So the benefit of moving to an account-based pension sooner is less for you. However, it will still affect the ongoing tax on income (dividends and interest).

Eligibility to move your super into an account-based pension

You can move up to the $1.9 million Transfer Balance Cap of your accumulation account balance into an account-based pension once you meet any of these conditions of release:

  • have reached preservation age and retired;
  • cease an employment arrangement on or after the age of 60; or
  • are 65 years old, even if you haven’t retired.

Under the third condition of release listed, if you have reached age 65, regardless of employment status, you are eligible to move your super to an account-based pension. For most people, the is a no-brainer.

Under the first condition of release, you need to retire, i.e., permanently cease gainful employment (or at least not be currently gainfully employed and sign a document stating your intention for it to be permanent) to convert to an account-based pension.

However – and read this paragraph carefully, because it’s the point of the article – if you are over 60, there is another option where you don’t need to retire permanently (or sign anything to that effect) to move your super into a zero-tax environment. You can convert your super to an account-based pension and take advantage of the tax-free nature by ceasing any gainful employment after the age of 60. This could be changing jobs where you end the former job and immediately start a new job, or it could be ending employment at a second job while continuing to work at your other job.

* Also to note is that if you do continue working after that, for any money you have not moved to an account-based pension, you will need to meet another condition of release to move it over. So if you change jobs or quit a second job and move your accumulation account into an account-based pension, and then continue to be gainfully employed, you cannot move the continuing contributions over until you either retire, cease a gainful employment arrangement, or reach age 65.

The definition of gainful employment

Establishing gainful employment:

The definition of gainfully employed under superannuation law is:

employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation, or employment.

And the definitions of full-time and part-time gainful employment for superannuation purposes is:


in relation to being gainfully employed, means gainfully employed for at least 30 hours each week.


in relation to being gainfully employed, means gainfully employed for at least 10 hours, and less than 30 hours, each week.

So technically, if you began a second job, worked for more than 10 hours, and quit, you would have met the definition of ceasing gainful employment. You could then move some or all your super to an account-based pension and start saving large amounts of tax within your super.

Interaction with other strategies

In addition to saving approximately 1% of your total balance per year by moving your super into a zero-taxed account-based pension, there are a couple of other strategies that can be used by gaining full access to your super.

Recontribution strategy

The recontribution strategy involves withdrawing super and re-contributing it. The reason for doing this is that if your super is paid to a non-dependent when you die (e.g., a child over 18), part of that is taxable. A recontribution strategy can effectively ‘wash away’ the taxable nature so that your beneficiaries can get more of the money they inherit.

Access to all of your super allows you to begin the recontribution strategy and start ‘washing out’ more of your taxable component to reduce tax payable for your beneficiaries on your death.

Income swap strategy

The income swap strategy is where you contribute to super and simultaneously draw from super. The result is a boost to your super balance through tax savings without foregoing any of your take-home pay. Most people cannot meet a full condition of release to access all their super before age 65 if they are still working, so a TTR pension is normally used, but a TTR pension has a restriction of accessing only up to a maximum of 10% of your TTR account balance per year.

Accessing all your super, rather than only the 10% maximum per year through a TTR pension, can allow you access to more cash to use with the income swap strategy. This is particularly helpful if you have a lot of unused concessional contributions to take advantage of but not the cashflow to contribute.

Downsides of moving to an account-based pension

Potential downsides of moving to an account-based pension are:

  1. Minimum withdrawals – You are required to withdraw a minimum 4% per year from an account-based pension (increasing with age). For many people, this won’t be an issue as you can recontribute it as a non-concessional contribution, provided you are eligible to make non-concessional contributions (e.g., under age 75 and Total Super Balance is below the Transfer Balance Cap), or you also could contribute to your partner’s account if they are eligible. Otherwise, this is a consideration.
  2. Transfer Balance Cap (TBC) – There are actually two TBCs. A General TBC (currently $1.9m) and your Personal TBC. The date you move money into an account-based pension, that portion of your Personal TBC is no longer indexed along with the General TBC, only the remaining portion is indexed. So moving to an account-based pension locks in how much you can put into this tax-free environment. For most people this isn’t an issue as they may not reach the General TBC, or the cost of waiting is not as beneficial as moving to a zero-tax environment, but for some, this may be a consideration.
  3. Age Pension – The age pension income and assets test exclude assets in a super accumulation account for those below age pension age. So, if an older spouse is eligible for the age pension, one way to reduce assets to boost age pension entitlements is to move assets into the younger partner’s accumulation account (but not to their account-based pension). This can be personal assets of the couple or even super assets of the older spouse.


Tip 1: If you made a personal contribution and intend it to be concessional, remember to lodge your NOI form before moving your super to a pension account, or you will lose the ability to claim the deduction.

Tip 2: Moving your entire balance across will close your accumulation account, which is needed to accept future contributions and to keep your life insurance in place, so you may want to leave $10,000 in there. Although, if it is closed and you need to add more to your super, you can always open another accumulation account.