The federal government has released exposure draft legislation allowing a reversionary transition to retirement income stream (TRIS) to automatically be transferred to an eligible dependent upon the death of the member receiving the pension without the beneficiary having to satisfy a condition of release.
“Allowing a TRIS to automatically revert in all cases will simplify administrative processes for superannuation funds,” the Minister for Revenue and Financial Services Kelly O’Dwyer said.
“It will also make it easier for superannuation members by eliminating the need for recently bereaved dependants to quickly engage with the super affairs at what is a particularly difficult time,” she added.
The SMSF sector has reacted favourably to what has generally been considered a common sense move.
Miller Super Solutions founder Tim Miller said the consultation highlighted the short-sighted nature of the original law.
“We have gone from an industry position where a reasonable assumption was made that a TRIS converted to an account-based pension on satisfying a condition of release to an overly complex position where we now have a TRIS in accumulation and a TRIS in retirement. This was heightened with death not being included in the conditions for converting to retirement,” Miller told selfmanagedsuper.
“The consultation is a welcome result, albeit something that could have been avoided from the outset.
SuperConcepts technical services and education general manager Peter Burgess told selfmanagedsuper the consultation paper was a positive development as Treasury had been quiet on the issue over the past few months.
“We currently have this admin burden of having to commute the TRIS and then start an account-based pension, which adds costs and confusion, so in that respect it’s a good development and we’re pleased this is being proposed,” Burgess said.
“So if the client is in a TRIS and they die, assuming this proposal goes through, then the pension will be able to automatically revert to the spouse where they have chosen a reversionary nomination; it all automatically happens in the same way it does for account-based pensions.
“Essentially it will align a reversionary TRIS with other normal account-based pensions.”
If legislated, the measure will apply to reversionary TRISs from 1 July 2017.
The SMSF Association also commended the government for its provision amendment proposal.
“It ensures that reversionary TRISs are afforded a 12 month delay for the transfer balance credit to occur on the death of an individual, giving the beneficiary the necessary time to get their affairs in order,” chief executive John Maroney said.
“As the association said in its budget submission: it gives beneficiaries 12 months before the pension is credited to their transfer balance cap, reduces documentation and compliance burdens, and rightfully places these pensions into the same legal position as reversionary account-based pensions.”