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Retirement

TRIS conversion should be considered

SMSF trustees and members should consider converting a transition-to-retirement income stream (TRIS) into an account-based pension (ABP) as the former is no longer classified as a retirement income product, according to an industry expert.

Peter Fry and Associates director Peter Fry told the recent SMSF Association SMSF Expo in Melbourne that under the 2016 federal budget super reforms a TRIS is no longer a retirement income stream, meaning earnings of the assets supporting the pension are taxed at 15 per cent.

The TRIS measure allows people who have reached their preservation age to access their super benefits without having to retire or leave their job. The preservation age for this strategy has been increased from 55 to 59. It was taxed up to 60 years of age and was tax-free after age 60, with members then being able to contribute that back into the fund.

“To have a retirement income product you have to have an ABP. That’s if you’ve met a full condition of release, so retirement, left employment after age 60,” Fry said.

“Now, you can have a TRIS at age 65 and not change it. It then becomes a TRIS with a new cashing restriction because there were problems of people having a TRIS and reaching 65. They’ve changed that definition.”

Members should cease the TRIS and commence an ABP to avoid any issues, he noted.

Fry also said it was vital for trustees to receive financial planning advice and to ensure they are provided with a statement of advice that explains the nuances in relation to their strategy as it involves a pension, which is considered a financial product. 

“All of these are contracts with your super fund with you as the trustee and there’s a large list of things you’ve got to go through to establish one of these,” he said.

“Whether you start or stop an income stream or a pension, it’s financial advice. As a trustee how would you know whether to stop or start a pension? When would you change it? How would you change it? What are the criteria? What are the rules you’ve got to look for? That’s financial product advice because a pension is classed as a financial product.”

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