Superannuation – Restrictions to Accessing Transition to Retirement Income Streams (TRIS)
Under the current rules, Australians who have reached their preservation age (i.e. currently 56 years of age) can commence a Transition to Retirement Income Stream (TRIS) while still working.
As the name suggests, the intention when TRISs were first introduced was that they would assist those wishing to reduce their working hours and ‘transition’ into retirement before completely giving up full time employment.
The Government is of the opinion that there were some taxpayers who were receiving an unfair tax advantage by commencing a TRIS, while still working in a full time capacity. To combat this perceived advantage, the Government has announced changes to the taxation benefits of commencing a TRIS. The rules around accessing super benefits under a TRIS remain unchanged.
From 1 July 2017, income earned by assets supporting a TRIS will not be tax free in the superannuation fund. The fund will continue to pay tax at 15% on investment earnings. This change will apply to all TRIS accounts, regardless of their start date.
Pensions will be taxed as pensions, not lump sums
Currently the income tax regulations allow, in certain circumstances, an income stream to be taxed as a lump sum benefit in the hands of the taxpayer. This is of benefit if the taxpayer is under 60 years of age, as it allows the amount received to count towards the tax free lump sum threshold of $195,000.
From 1 July 2017 this will be amended. Any benefits withdrawn as pension benefits or income streams will be taxed as income streams in the hands of the taxpayer, removing any tax advantage.
We believe the proposed changes to TRISs will be effective in achieving the Government’s aim of ensuring that TRISs are used to supplement earnings, rather than providing a tax benefit. The change to all TRIS accounts from 1 July 2017 will provide simplicity and equity to all TRIS recipients.