Preparing to offer a TRIS
The commencement of a TRIS won't count as a credit to the member's transfer balance account.
Before starting to pay any pension, we recommend you seek the advice of a professional such as an accountant, financial planner or actuary.
Features of a TRIS
A TRIS must be an account based pension and satisfy the following standards in the SIS Regulations:
- There must be a payment from the pension at least once each year.
- An account balance must be attributable to the recipient of the pension.
- Each year, a specified minimum amount must be paid to the recipient (see Paying the minimum annual pension payment amount).
- The capital value of the pension and the income from it cannot be used as a security for a borrowing.
- The pension can only be transferred to another person on the death of the recipient.
Until the recipient meets a condition of release with a nil cashing restriction:
- The total payments made in a year must not exceed 10% of the account balance on the commencement of a TRIS for the year it starts or on 1 July for each subsequent year (see Maximum annual pension payment limit).
- The restrictions on the commutation of the pension must be met.(see Restrictions on withdrawals).
If you don't meet these standards when paying a TRIS in an income year, both of the following apply:
- As trustee, you are deemed not to have paid an income stream at any time during the year.
- The super income stream (the TRIS) ceases for income tax purposes.
Setting up a TRIS
When a member asks to commence a TRIS you should first establish the amount of benefits they have in the SMSF. To do this, refer to the valuation guidelines for SMSFs to help you establish the value of all the fund's assets and liabilities and each member's share of the net value of the fund.
You should also determine the amount of each preservation class of benefits the member has in the SMSF. A member may have a mix of unrestricted non-preserved benefits, restricted non-preserved benefits and preserved benefits.
If the member chooses to commence a TRIS using an amount less than their total super benefits in the SMSF, you can (but don't have to), allocate the preservation classes of the member's benefits to the TRIS.
When commencing to pay a TRIS, you are required to treat the amount supporting the income stream as a separate interest in line with income tax laws. This means on the commencement day of the TRIS you must determine the amount of the tax-free and taxable components of the separate interest.
Note: Members can't choose which tax components they wish to start the TRIS with. The tax components of the separate interest will be in the same proportions as the tax components of the member's non-pension interest from which the amount was sourced to commence the TRIS just prior to commencing the TRIS.
See also: