Transition of Retirement Income Streams


 

When an SMSF member decides to transition to a retirement income stream (TRIS), it’s imperative to know the legislation and correct procedures. 

Commencing a TRIS
Steps to commencing a TRIS as stated on the ATO website:

  1. Establish the amount of benefits, assets and liabilities a member has in their SMSF;
  2. determine the amount of each preservation class of benefits the member has;
  3. if the member commences a TRIS with an amount less than their total super benefits, you can allocate the preservation classes of the member's benefits to the TRIS; and
  4. upon commencing to pay a TRIS, you must determine the amount of the tax-free and taxable components of the separate interest.

Running a TRIS
Steps to running a TRIS as stated on the ATO website:

  1. Ensure the appropriate records are being maintained;
  2. a member must be paid the minimum annual pension amount each financial year;
  3. regarding paying benefits, an amount rolled over to another super fund or retained in the fund, is not counted when working out if the minimum annual pension amount has been paid;
  4. as each TRIS payment is made, the fund’s record of the member’s preservation classes allocated to the TRIS must be adjusted; and
  5. a TRIS doesn’t convert to a new income or pension stream until it ceases through means of either:the member turning 65, retiring, being permanently incapacitated or terminally ill.

Transitioning

  • After July 1, 2017, a member can continue or transition to a retirement income stream if they’ve met the preservation age. Tax still needs to be paid on the earnings of assets from the fund to support the transition to a retirement income stream.
  • For members who commence a TRIS before July 1, 2017, a 15% tax will be added to any earnings from assets that have not yet met these conditions.

Contact Super Audits today for all your SMSF auditing needs.

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