Transition to Retirement Income Streams

Some of the biggest changes to superannuation since the early 90s are coming into effect from 1 July 2017. This only leaves five months for your clients to review their superannuation affairs and ensure they are best positioned to receive the maximum benefits from 1 July 2017. 

One of the key changes is concerning Transition to Retirement Income Streams (TRIS). From 1 July 2017, the tax exempt treatment of earnings assets supporting TRIS will cease and the standard superannuation concessional tax rate of 15% will apply. It is important to note that this change will catch all clients who are in receipt  of TRIS and there will be no grandfathering for those who commenced these income streams prior to 30 June 2017.

When TRIS were introduced back in 2005, the intention of these income streams was to allow people to gradually reduce their working hours and supplement their income from their superannuation savings. Since the introduction, the majority of people have been utilising these income streams as a strategy to minimise tax in their personal name and increase their super balances without reducing their working hours.

With the tax exemption on earnings supporting TRIS being removed, the benefit is going to be derived from personal tax savings. This will favour those who are between 60 and 64 years of age as the personal taxation of the pension being paid to them will remain unchanged.

Key considerations

  • TRIS will not count towards the $1.6M pension transfer cap
  • TRIS can still be worthwhile in certain circumstances
  • Previous advice regarding TRIS will have to be reassessed
  • Reduction of concessional contributions from 1 July 2017 will also limit salary sacrificing opportunities

TRIS will still be an effective strategy for those looking to transition out of work and supplement their income. The change in the tax rate on earnings will prompt clients in receipt of TRIS to see if they can satisfy a condition of release. This will permit them to convert their TRIS to an Account Based Pension (ABP) and access the tax exemption on earnings. Advice should be sought if a condition of release can be met and if converting to an ABP, how this will be recorded against their $1.6M pension transfer cap and if any CGT rollover relief advice is required.

How can we help?

Partners Wealth Group is actively working with our accounting clients to:

  • Hold client seminars to provide an update of the changes
  • Assist with alerts to your clients concerning the changes
  • Conducting SMSF reviews to identify the impacted clients
  • Hold review meetings with clients to run through the impact and advice
    requirements under the new changes

With only five months to go, there is little time to act. Please contact your Partners Wealth Group advisor now, to discuss how we can help.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.