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Changes to Superannuation - Transition to Retirement Income Streams - Part 3 of 6

This blog entry is part 3 of our 6 part series on the changes taking place from 1 July 2017. You can access the summary and all blog articles in the series from this page.

Transition to Retirement Income Streams (TRIS)

Tax exemption in fund removed

 Until 30 June 2017, superannuation funds who pay transition to retirement income streams receive tax concessions on the earnings from assets supporting the transition to retirement income stream. For example, lets say a member has $1m in accumulation phase and $1m supporting a TRIS. In this simplistic example, the member has 50% of the fund in accumulation phase and 50% in pension phase.

 50% of taxable investment earnings (not contributions) will be exempt as they support the pension, and 50% will be taxable under the usual tax rules for superannuation funds.

From 1 July 2017 the tax exemption for transition to retirement pensions will be removed, and 100% of the taxable investment earnings will be taxed in the fund. 

Pension payments taken as a TRIS remain tax free to the member if they are taken after age 60.  Pension payments taken as a TRIS prior to age 60 (but after preservation age) are taxed under the existing rules which is normal marginal rates on the taxable component of the benefit with a 15% tax offset.

Not Subject to $1.6m cap

As transition to retirement income streams do not receive concessional tax status within the fund, they are not subject to the $1.6m cap. However TRIS recipients must be particularly careful that they do not inadvertently convert their TRIS to a full account based pension which is subject to the new rules. Common triggers causing a conversion to an account based pension include permanently retiring after reaching preservation age, changing conditions of employment after age 60, and reaching age 65.

Will TRIS payments still be tax free to pensioners age 60 or over?

Yes, pension payments are still tax free in the hands of the member if they are received after age 60 from a Transition to Retirement Account Based Pensions.

Disclaimers

This information is provided by A Squared Advisers Pty Ltd.

The information provided to you above is purely factual in nature and does not take account of your personal objectives, situation or needs. The information is objectively ascertainable and, therefore, does not constitute financial product advice. If you require personal advice you should consult an appropriately licenced or authorised financial adviser.