Strategy spotlight: Using a Transition to Retirement Pension to smash your home loan July 25th, 2025

What is a TRABP?

A TRABP allows you to move all or part of your super accumulation balance into an Account Based Pension while you’re still working. Most super funds offer this option once you’ve reached preservation age, which is currently 60.

Because you’re over 60, none of the income payments from the TRABP are taxable. That’s a crucial point.

So why would you do this?

Why this works: the after-tax math

Let’s say you’re currently paying 6% interest on your mortgage, or worse, an even higher rate on something like a maxed-out credit card. You’re servicing this debt with after-tax dollars.

Now imagine an investment that pays you exactly 6% interest. You might think this would be enough to cover your mortgage interest. But once you factor in tax, it’s not.

If you’re earning $100,000 per year, you’re in the 30% marginal tax bracket, plus the 2% Medicare Levy, bringing your total tax rate to 32%.

If your investment returns 6%, the tax alone takes 1.92%, leaving you with a net return of 4.08%.

So to end up with a 6% after-tax return, you’d actually need a before-tax return of 8.82%. That pushes you up the risk curve, fast.

This is why repaying non-tax-deductible debt ASAP is often the least risky and most tax-efficient financial strategy available.

Enter the TRABP strategy

Once you’ve started a TRABP, you are required to withdraw a minimum of 4% of your account balance each year if you’re under 65. From 65 to 75, the minimum rises to 5%, calculated off the June 30 balance.

But here’s where TRABPs differ from normal Account Based Pensions: they have a maximum annual withdrawal limit of 10%.

So, in theory, you could only pay off your mortgage in 10% annual chunks.

But here’s the clever bit.

There’s no rule stopping you from doing the following:
1. Start a TRABP and immediately withdraw the full 10%.
2. Use that amount to pay down your mortgage.
3. Transfer the TRABP back into accumulation phase at any time—yes, really.
4. Start a new TRABP (assuming you're over 60) and repeat the process.

There’s no legislative barrier to doing this again and again (as long as you’re over 60).

The result?

You could make multiple 10% lump sum withdrawals, applying each one to knock down your mortgage, and then, once the loan’s gone, redirect your now-freed-up mortgage repayments back into super. This time, you could make concessional (tax-deductible) contributions - ideally via salary sacrifice.

It’s a clever loop: accelerate your debt repayment with tax-free pension payments, then rebuild your super with tax-deductible contributions. The easiest way might be through Salary Sacrifice arrangements.