Following the Superannuation Reform Changes for SMSFs paying a TRIS from 1 July 2017, two types of transition to retirement pensions exist:
- TRIS &
-
TRIS in Retirement Phase (exempt TRIS)
See also: How to convert a TRIS to TRIS - Retirement Phase.
A TRIS will continue to provide the following benefits:
(a) Providing access to a members superannuation balance.
(b) Income on assets supporting a TRIS will generally be subject to tax at the 15% rate.
(c) A member who starts a TRIS in Retirement Phase will be entitled to a pension earning exemption.
(d) A fund member who commences a TRIS can still utilise the proportioning rule on commencement.
Exempt Current Pension Income (ECPI)
| TRIS | From 1 July 2017, the pension earnings exemption has been completely removed for income derived from assets supporting a TRIS. Therefore, any income derived when a member is in TRIS phase will be taxed at the fund tax rate (15%.) |
| TRIS in Retirement Phase | This classification only applies if the member has met and satisfied a 'nil' cashing restriction condition of release. Therefore, the income from TRIS in Retirement Phase will form part of the exempt pension income calculation. |
Allocation of earnings
| TRIS | When a TRIS has been set up earnings will always be allocated to the Preserved benefit regardless of age. |
| TRIS in Retirement Phase | When a member has been set up as a TRIS in Retirement Phase all benefits generally become unrestricted non-preserved (UNP). SF 360 will now allocate earnings to UNP. |
Maximum Annual Pension Limit
| TRIS | The max 10% limit will still apply to a TRIS account. |
| TRIS in Retirement Phase | No Maximum annual pension payment limit applies as a TRIS in Retirement Phase satisfies a condition of release with a 'nil' cashing restriction. |
Transfer Balance Cap/Account
| TRIS | A TRIS is not subject to the $1.6 million Transfer Balance Cap (TBC) therefore, is not subject to the rules that govern a Transfer Balance Account (TBA). As such, the capital used to commence a TRIS is not reported as a credit in a TBA. |
| TRIS in Retirement Phase | The TRIS in Retirement Phase becomes subject to the TBC rules. This means that the member’s TBA comes into existence and is credited with the value of the pension at that time. |