Transition to Retirement Income Streams (“TRIS”) – once a TRIS always a TRIS?

Created on March 21, 2018 1:25 pm

Transition to Retirement Income Streams (“TRIS”) allow individuals to access their superannuation benefits prior to retirement or without having to terminate their employment.

Who is eligible for a TRIS?

Provided the individual has reached their preservation age a TRIS can be commenced.

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

Is there a limit on how much can be withdrawn under a TRIS?

Yes. There is a minimum annual percentage that needs to be withdrawn based on the individual’s age calculated on the day the pension commences or on 1 July for each subsequent year:

Age Percentage of account balance at 1 July 2017
Under 65 4%
65 – 74 5%
75 – 79 6%
80 – 84 7%
85 – 89 9%
90 – 94 11%
95 or more 14%

There is also a maximum annual limit of 10% of the pension’s account balance calculated on the day the pension commenced for the year the pension started, or on 1 July for each subsequent year.


 

TRIS since 1 July 2017

Since the super reforms came in on 1 July 2017, there are now two types of TRIS:

  1. Accumulation Phase TRIS
  2. Retirement Phase TRIS

with the main changes being:

  • 15% tax on earnings now apply (previously tax-exempt) for accumulation phase TRIS; and
  • no lump sum payments are permitted under an accumulation phase TRIS.

A detailed comparison of the two new TRIS’ are as follows:

  Accumulation Phase TRIS

 

Retirement Phase TRIS

 

Nil cashing restriction to be satisfied N/A Yes upon meeting a condition of release such as:

·       Retirement

·       Attaining age 65

·       Permanent incapacity

·       Terminal illness

Tax on fund income 15% Exempt Current Pension Income applies
Subject to Transfer Balance Cap No Yes
Access to Lump Sum Payments No

(excluding Unrestricted Non-Preserved components)

Yes

(but not counted towards annual minimum pension)

Tax on member’s pension payments Subject to tax concessions (eg. 15% tax offset on taxed element) If < age 60:  Subject to tax concessions (eg. 15% tax offset on taxed element)

 

If > age 60: Tax free

 

Transfer Balance Cap (“TBC”) for Retirement Phase Accounts

A $1.6m transfer cap balance now limits the amount held in pension phase and receiving tax-free earnings.

Accumulation Phase TRIS’ will not count towards the TBC until they become a Retirement Phase TRIS.

Does an Accumulation TRIS automatically become a Retirement Phase TRIS?

It depends. If the original TRIS pension agreement specifies that upon meeting a nil cashing condition of release restriction, the Accumulation Phase TRIS will then automatically convert to a Retirement Phase TRIS.

Should the pension agreement be silent, the conversion will not occur until the time in which the member notifies the trustee of the SMSF that they have met a condition of release eg. retirement.

As such, when an individual’s employment status changes and they are in receipt of a TRIS, it is important that they notify the trustees of their SMSF immediately.

An exception is attaining age 65, whereby an automatic conversion of the Accumulation Phase TRIS to a Retirement Phase TRIS occurs, and is therefore counted towards ones TBC.