Retirement financial planning becomes more flexible with the Transition to Retirement Income Streams (TRIS). These streams enable individuals to access their superannuation benefits before retiring or without needing to end their employment.
Who is eligible for a TRIS?
A TRIS can be commenced if the individual has reached their preservation age.
| 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Is there a limit on how much can be withdrawn under a TRIS or Account Based Pension (ABP)?
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 There is a minimum annual percentage that needs to be withdrawn based on the individual’s age calculated on the day the pension commences or on 1 July for each subsequent year: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 the account balance on 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 TRIS account balance calculated on the day the pension commenced for the year the pension started or on 1 July for each subsequent year. For an ABP, there is no maximum. Most TRIS move to an ABP after the age of 65.
TRIS since 1 July 2017
Since the super reforms came in on 1 July 2017, there are now two types of TRIS:
- Accumulation Phase TRIS
- Retirement Phase TRIS
With the main changes being:
- 15% tax on earnings now applies (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 (e.g. 15% tax offset on the taxed element) |
If < age 60: Subject to tax concessions (e.g. 15% tax offset on the 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 the 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 automatically convert to a Retirement Phase TRIS.
Should the pension agreement be silent, the conversion will not occur until the member notifies the SMSF trustee that they have met a condition of release, e.g. retirement.
As such, when an individual’s employment status changes and receives a TRIS, they must immediately notify the trustees of their SMSF.
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 one TBC.
Kreston Stanley Williamson Team
*Correct as of March 2018
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
