From purchase to pension: planning your endgame

A building is not a retirement. Income you can spend is. This chapter turns one into the other, on purpose, with about five years of runway.

Everything in the first thirteen chapters exists for this one. The rules, the leases, the borrowing, the compliance: all of it is scaffolding around a single outcome, which is you, at some age you get to pick, drawing tax free income from assets you built on purpose. This chapter is that outcome, engineered rather than hoped for.

Unlocking the money

Super converts from locked savings to spendable income when you meet a condition of release. The two that matter for most people: reaching 60 and retiring, or reaching 65, full stop, working or not. In between sits the transition to retirement option for people winding down, useful but niche enough to leave with your adviser.

Meeting a condition does not force anything. It opens the door. What you do at the door is the strategy.

The two phases, and the number that divides them

While you accumulate, the fund pays 15 per cent on income and an effective 10 per cent on long held capital gains. When you start a retirement pension, the assets supporting it move to a tax rate of zero. Rent, interest, capital gains on those assets: zero. This is the finish line the whole structure has been running toward.

The gate on that finish line is the transfer balance cap: the lifetime limit on how much each person can move into the tax free retirement phase. From 1 July 2026 the general cap is $2.1 million, indexed in $100,000 steps from time to time. Anything above your cap simply stays in accumulation, still enjoying 15 per cent, which remains a perfectly good tax rate to retire on. For a couple, that is up to $4.2 million of zero rated assets between you at current settings, which is more than enough runway for every strategy in this book.

The pension mechanics, and the cash problem

Once a pension starts, the law requires minimum annual payments, calculated as a percentage of the account balance each 1 July:

Age	Minimum annual payment
Under 65	4 per cent
65 to 74	5 per cent
75 to 79	6 per cent
80 to 84	7 per cent
85 to 89	9 per cent
90 to 94	11 per cent
95 and over	14 per cent

Read the table and then read the sentence that makes it bite: minimums must be paid in cash. Not in promises, not in equity, not in “the property is worth plenty”. Cash, out of the fund, into your bank account, every year, or the pension loses its tax exemption.

Now you can see the collision coming for property heavy funds. A building can be a magnificent store of wealth and a mediocre cash machine at exactly the moment the law starts demanding cash on a schedule.

Helen and Bruce meet the table

At 65, their combined minimum is 5 per cent of $1.5 million: $75,000 a year, in cash. The fund’s actual cash income is about $49,000. The gap, $26,000 every year, must come from somewhere, and at their asset mix that means selling down the liquid sleeve, which shrinks it, which raises the property’s share of the fund, which makes next year’s version of the same problem slightly worse. Left alone for a decade, the strategy quietly eats its own flexibility.

None of this makes their house a mistake. It makes their next five years a planning window, with real options:

Fatten the liquid sleeve before retirement. Maximum contributions in the final working years, directed to liquid assets, including up to $300,000 each in downsizer contributions if selling the family home is on their cards anyway.

Sell the property inside pension phase. Here is the payoff move the whole book has been setting up: once the fund is supporting their pensions, a sale of the property can attract zero capital gains tax. Decades of growth, realised at nothing, converted into a portfolio that pays cash on demand. For many property funds, the plan was always sell at the start of pension phase, on purpose, at the zero rate; they just never wrote it down.

Restructure rather than sell. Keep the property, accept a permanent drawdown from the sleeve, and top the sleeve up with part sales of shares in strong years. Legitimate, provided somebody has actually done this arithmetic instead of discovering it at 78.

Their adviser’s real contribution was not picking an option. It was making them pick one at 60 instead of finding out at 67. Five years of runway is the difference between choosing and scrambling; appendix L is the worksheet that starts the clock.

The business premises endgame

Raj’s version of this chapter has an extra dimension, because his fund’s tenant is his business, and both are retiring on linked schedules. His menu at the exit:

Sell the business, keep the building. The new owner of the consultancy keeps trading from the same premises, now paying rent to Raj’s pension phase fund at zero tax. For strong premises this is often the best pension asset in the family: a known building, a motivated tenant, a net yield that residential never matches.

Sell both together. Business plus freehold can be a premium package for the right buyer, with the property’s gain realised inside pension phase at that same beautiful zero.

Take the building out. An in specie lump sum can transfer the property itself from the fund to the members once a condition of release is met, where the estate plan wants the asset in personal hands. It is a capital gains event for the fund, zero in pension phase, but transfer duty may apply on the way out and the transaction has moving parts. Specialist advice, well before the retirement party.

Division 296: the big balance tax, and its deadline

If your total super balance is heading past $3 million, one more system engages. Since 1 July 2026, Division 296 adds personal tax on part of the earnings of large balances: a headline 30 per cent on realised earnings attributable to the slice between $3 million and $10 million, and 40 per cent above that, with both thresholds indexed over time. It is assessed to you personally, payable from your pocket or released from super, and the first assessments follow 30 June 2027. It taxes realised earnings only, so a year of paper gains on an unsold property does not create a bill, and a loss year simply means no Division 296 tax that year.

Most readers will never touch it. But property plus contributions plus decades of compounding is exactly the recipe that eventually can, so two planning notes earn their place.

First, the design rewards timing awareness: because the tax bites on realised earnings while balances sit above $3 million, the interaction between when you sell, what phase the fund is in and where your balance sits is now real money. That is personalised advice territory, flagged so you know to raise it.

Second, and urgently for anyone already in range: the one off cost base reset election. Funds could elect, in their 2026 to 27 annual return, to reset every capital gains tax asset to its 30 June 2026 market value for Division 296 purposes only, so that growth from before the regime never counts as Division 296 earnings when eventually realised. It is all assets or none, and irrevocable. For a fund holding property with large embedded gains, the election can be worth serious money, and the window closes when that return is lodged, with lodgement deadlines running through late 2027 into 2028 depending on your agent status. If there is any chance this is you, it is a this year conversation with your accountant, not a note for later. Miss the return, miss the election, permanently.

Death: the part nobody plans and everybody should

Two facts most trustees learn too late, presented on time.

Super does not follow your will. Fund benefits are paid under the trust deed and your nominations, not your will, unless deliberately routed there. A valid binding death benefit nomination, or a reversionary pension that continues automatically to your spouse, is what actually decides where decades of this book’s work lands. No valid nomination means the trustee decides, and in blended families that sentence has funded a great deal of litigation.

The ATO taxes some inheritors and not others. Paid to a spouse or other tax dependant, benefits are tax free. Paid to adult children, the taxable component loses up to 17 per cent. On a large, property backed balance that difference is six figures, and it is exactly the kind of thing recontribution strategies and payment timing can legally soften, in the hands of an adviser, well in advance.

Add the property angle: a fund whose main asset is a building can owe a death benefit it cannot pay without selling that building, on the market’s schedule rather than the family’s. The answers are the ones you already know: the liquid sleeve, insurance held inside the fund where the strategy calls for it, and where the deed allows, in specie payment of the property itself to beneficiaries. What turns any of them from theory into protection is doing the thinking while everyone is alive and well.

The whole game, in one paragraph

Build the fund honestly, buy assets that pay real income, keep the rhythm, and then land it: pensions started, cap used well, the big gain realised at zero when the timing is yours, cash flowing on schedule, nominations valid, family protected. Emma runs her projection out to 60 and the shed she bought at 40 is long since debt free, throwing off indexed rent into a zero tax pension. Somewhere in your numbers is your version of that sentence. The next five chapters of your life are the appendices. Go fill them in.

Find your sweet spot, or have the guts to walk away.