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Founded in Bondi Beach in 2012, Bailey Nelson has rapidly grown into a global eyewear retailer and service provider with boutiques in Australia, London, Canada and New Zealand. The strong demand for their products and … Continued

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Transition to Retirement Income Streams

From 1 July 2017, the tax exemption for transition to retirement income streams (TRIS) will end. That change was effected by the superannuation reforms which became law on 29 November 2016 (2017 Superannuation Reforms).

The change raises an issue about whether and how a TRIS can become a ‘retirement phase’ income stream when the pensioner satisfies the relevant condition of release. On 25 May 2017 the Federal Government introduced an amendment bill into the House of Representatives which proposes technical amendments to resolve that issue.

The transition to retirement income streams (TRIS)

An individual who has reached preservation age can draw down on their superannuation interests before they retire from the workforce or turn 65.[1] This can be done by the individual commencing one of the following (a TRIS):

  • a transition to retirement income stream
  • a transition to retirement pension
  • a non-commutable allocated pension or
  • a non-commutable allocated annuity.

From 1 July 2017, TRISs will be excluded from the earnings tax exemptions (Tax Exemption) as they are expressly excluded from being considered a ‘retirement phase’ income stream.[2]

‘Once a TRIS, always a TRIS’?  Ambiguity created by the 2017 Superannuation Reforms

The 2017 Superannuation Reforms[3] created ambiguity about whether a TRIS could ever qualify as a ‘retirement phase’ income stream which is eligible for the Tax Exemption.

Advisers have since been fielding and posing a number of questions relevant to this issue:

  1. Does my TRIS automatically convert into an account-based pension when the pensioner satisfies a condition of release with a nil cashing restriction?
  2. Do I need to commute and replace my TRIS with a new (non-TRIS) superannuation income stream?
  3. Once a pension is commenced as a TRIS, will it always be a TRIS?
  4. Is there anything I can do to ensure my TRIS automatically converts to a retirement phase income stream?

The Amendment Bill provides the answer

The good news is that the new amendment bill[4] provides an answer to all these questions. A TRIS will become a retirement phase income stream when the member satisfies the nil condition of release or, if required to, has notified the superannuation income stream provider of that fact.[5]

At the time of publication, the bill has progressed to its Second Reading. If passed in its current form, these changes are likely to commence on 1 October 2017.[6]

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.

Author
  Jessica Leppert | Lawyer
T +61 3 9258 3607
E jessica.leppert@maddocks.com.au

[1]Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Accounts Regulations 1997.

[2] See schedule 8 and section 307-80, Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.

[3]Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.

[4]Treasury Laws Amendment (2017 Measures No 2) Bill 2017.

[5] Schedule 1 item 13 of the amendment bill.

[6] As it is unlikely to receive royal assent before 1 July 2017: see section 2 of the amendment bill.

From 1 July 2017, the tax exemption for transition to retirement income streams (TRIS) will end. That change was effected by the superannuation reforms which became law on 29 November 2016 (2017 Superannuation Reforms).

The change raises an issue about whether and how a TRIS can become a ‘retirement phase’ income stream when the pensioner satisfies the relevant condition of release. On 25 May 2017 the Federal Government introduced an amendment bill into the House of Representatives which proposes technical amendments to resolve that issue.

The transition to retirement income streams (TRIS)

An individual who has reached preservation age can draw down on their superannuation interests before they retire from the workforce or turn 65.[1] This can be done by the individual commencing one of the following (a TRIS):

  • a transition to retirement income stream
  • a transition to retirement pension
  • a non-commutable allocated pension or
  • a non-commutable allocated annuity.

From 1 July 2017, TRISs will be excluded from the earnings tax exemptions (Tax Exemption) as they are expressly excluded from being considered a ‘retirement phase’ income stream.[2]

‘Once a TRIS, always a TRIS’?  Ambiguity created by the 2017 Superannuation Reforms

The 2017 Superannuation Reforms[3] created ambiguity about whether a TRIS could ever qualify as a ‘retirement phase’ income stream which is eligible for the Tax Exemption.

Advisers have since been fielding and posing a number of questions relevant to this issue:

  1. Does my TRIS automatically convert into an account-based pension when the pensioner satisfies a condition of release with a nil cashing restriction?
  2. Do I need to commute and replace my TRIS with a new (non-TRIS) superannuation income stream?
  3. Once a pension is commenced as a TRIS, will it always be a TRIS?
  4. Is there anything I can do to ensure my TRIS automatically converts to a retirement phase income stream?

The Amendment Bill provides the answer

The good news is that the new amendment bill[4] provides an answer to all these questions. A TRIS will become a retirement phase income stream when the member satisfies the nil condition of release or, if required to, has notified the superannuation income stream provider of that fact.[5]

At the time of publication, the bill has progressed to its Second Reading. If passed in its current form, these changes are likely to commence on 1 October 2017.[6]

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.

Author
  Jessica Leppert | Lawyer
T +61 3 9258 3607
E jessica.leppert@maddocks.com.au

[1]Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Accounts Regulations 1997.

[2] See schedule 8 and section 307-80, Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.

[3]Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.

[4]Treasury Laws Amendment (2017 Measures No 2) Bill 2017.

[5] Schedule 1 item 13 of the amendment bill.

[6] As it is unlikely to receive royal assent before 1 July 2017: see section 2 of the amendment bill.