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Is there a limit on how much can be withdrawn under a TRIS or Account Based Pension (ABP)?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 There is a minimum annual percentage that needs to be withdrawn based on the individual’s age calculated on the day the pension commences or on 1 July for each subsequent year: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 account balance at 1 July 2017|
|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 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:
· Attaining age 65
· Permanent incapacity
· Terminal illness
Tax on fund income
Exempt Current Pension Income applies
Subject to Transfer Balance Cap
Access to Lump Sum Payments
(excluding Unrestricted Non-Preserved components)
(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.