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Transition to retirement

Reversionary TRIS

Section: 13.7

When the super reforms came into place from 1 July 2017 this limited the treatment of TRIS to move into the retirement phase only when the beneficiary has satisfied a condition of release with a nil cashing restrictions.

When the TRIS is reversionary it does not cease when the member dies but continues to be paid and the entitlements to the payments transfers to the reversionary beneficiary. However, a TRIS can only revert to a dependant beneficiary who satisfies a condition of release. Section 6.21 of the SIS Regs, states that a member's superannuation interest can only be paid as a superannuation income stream if the income stream is in the retirement phase and paid to a dependant beneficiary.

In 12 February 2019, the Government modified the rules that determine when a TRIS is in the retirement phase to ensure that a reversionary TRIS can always be paid to a reversionary beneficiary. This was done by adding a line to ITAA97 s307-80(3), the definition of what is not a retirement phase pension is clearer with the following insertion:

"307-80(3)(aa) the person to whom the benefit is payable is not a reversionary beneficiary'.

This amendment allows original TRIS to be paid to the dependent beneficiary rather than having to be commuted and a new income stream started from the deceased member's underlying superannuation interests.

Example: Reversionary TRIS

David was 61 and in receipt of a TRIS at the time of this death on 10 November 2017. David nominated his spouse, Mary aged 57, as the reversionary beneficiary. Mary worked as a school-teacher (full-time) and has not satisfied a condition of release with a nil cashing restriction.

Due to the amendments, Mary who is nominated as reversionary beneficiary is automatically entitled as a reversionary beneficiary, the insertion of paragraph 307.80(3)(aa) into the ITAA 1997 will allow for this pension to continue.

source: 1. Reversionary transition to retirement legislative issue fixed, legalwise

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

Last modified: Wednesday, September 30, 2020