Before 1 July 2017, a Transition To Retirement Income Stream (i.e. TRIS pension) allows an individual who has reached their preservation age to gain access to their superannuation benefits while they continue to work. The benefit of drawing a TRIS was that the earnings of the assets supporting this type of pension account is exempt from tax, and if the individual is 60 years old or older, the income itself will be tax free in their hands.

From 1 July 2017, the government has brought in rules that effect a TRIS:

1. The income tax exemption on the earnings of assets supporting a TRIS is removed: in the new legislation, a TRIS is not considered a ‘retirement phase’ pension and thus its earnings tax exemption no longer applies. Income earned by assets supporting a TRIS will be taxable at 15%. On the other hand, a TRIS will not be counted toward an individual’s Transfer Balance Account as it is not in ‘retirement phase’.
3. The ability to commute a lump sum from a TRIS is removed: under the current law, an individual with a TRIS can elect to receive a lump sum instead of a pension and still have this payment count toward the minimum pension payment obligation but at the same time as it is a lump sum, the taxable component of the payment is tax free up to the low rate cap. With the change in regulation, the taxable component of such payment will be included in the individual’s assessable income and taxed at marginal tax rates.

If you have a TRIS, we would strongly suggest that you contact us to discuss your situation before the 30^th June.

Submitted by Helene Kosasie