Transition to retirement
When is a TRIS in the retirement phase?
13.6 When is a TRIS in the retirement phase?
A TRIS will move into the retirement phase when the member meets one of the following conditions of release:
- age 65
- permanent incapacity, or
- terminal medical condition
A TRIS will move automatically into the retirement phase as soon as the member reaches age 65, or if the superannuation income stream starts to be paid to a reversionary beneficiary after the member's death. For the other conditions of release listed above, the member needs to notify their super provider for the TRIS to move into the retirement phase. In these cases the superannuation income stream will move into the retirement phase at the time the provider is notified.
A member does not need to commute and restart a TRIS for it to move into the retirement phase. A member's age will affect whether or not 'retirement' has occurred. Where the member is 60 years old over, they must have:
- ceased an arrangement under which they were gainfully employed when they were 60 years old or over, or
- ceased an arrangement under which they were gainfully employed at any other time., and the trustee must be satisfied they have no intention of becoming employed again in the future.
Where the member is under 60 years old, but has reached their preservation age, they must have ceased an arrangement under which they were gainfully employed, and the trustee must be satisfied they have no intention of becoming employed again in the future. The member may have ceased the employment arrangement prior to the member reaching their preservation age. However, 'retirement' cannot occur until the member reaches their preservation age.
Does a TRIS change into a different kind of superannuation income stream once it is in the retirement phase?
A TRIS does not convert into any other form of superannuation income stream when it moves into the retirement phase. It will continue to satisfy the definition of a TRIS, and will only be 'converted' to another kind of superannuation income stream if it is ceased and a new superannuation income stream is commenced.
The regulatory restrictions particular to a TRIS (the maximum annual and commutation restrictions) fall away automatically once the member meets one of the conditions of release listed above, subject to the governing rules of the fund and/or the agreement or standards under which the TRIS is provided. Once those limitations are gone, the TRIS has the same restrictions and requirements as an account-based superannuation income stream.
|Example: TRIS moving to retirement phase
Wendy is 58 years old and still working and receives a TRIS that is not in the retirement phase at 30 June 2017. Wendy started a TRIS valued at $1.1 million on 1 January 2015. This is her only superannuation income stream. Her superannuation fund is able to claim ECPI in respect of the TRIS until 30 June 2017.
From 1 July 2017, as Wendy's TRIS was not in the retirement phase it was no longer eligible for ECPI As Wendy had no retirement phase superannuation income streams she did not have a transfer balance account created on 1 July 2017.
Wendy decided to retire from her job on 1 September 2018 and meets the retirement conditions of release. Wendy did not notify her fund that she has met this condition of release until 30 June 2019.
On 30 June 2019 (the date Wendy notifies her fund), her TRIS moves into the retirement phase. Her TRIS valued at $1 million on this date.
From 30 June 2019, as the TRIS is in retirement phase:
On 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 allowed an 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.
Source: GN 2019/1- Changes to transition-to-retirement income streams
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, June 28, 2023