Ceasing a TRIS
The most common circumstances for a TRIS ceasing include:
Failing to meet the standards
Once a TRIS commences you, as trustee, must ensure that all the relevant standards in the SIS Regulations are met at all times. If the super standards are not met in an income year both of the following apply:
- The trustee has not been paying an income stream at any time during the year.
- The super income stream (that is, the TRIS) ceases for income tax purposes.
If your fund has failed to meet the pension standards because the trustee has not paid the minimum annual pension payment amount, there are limited circumstances where the Commissioner may allow the fund to continue to claim exempt current pension income (ECPI).
Note: From 1 July 2017, earnings from assets supporting a transition to retirement income stream (TRIS) will not be eligible for ECPI in any circumstances and will be taxed at 15%. This will apply to all TRIS regardless of the date the TRIS commenced.
Note: Your SMSF can't continue to claim ECPI for a TRIS that has ceased because the maximum annual pension payment limit of 10% has been exceeded.
Full commutation of a TRIS
A TRIS ceases when a member's request to fully commute their entitlement to a TRIS for an entitlement to a lump sum takes effect.
Subject to the preservation status of the benefits, the SMSF's trust deed and the rules of the TRIS, a member can fully commute the TRIS and:
- leave the funds that were supporting the TRIS in the SMSF or roll them over to another complying superannuation fund. A member who hasn't met a condition of release with 'Nil' cashing restrictions and who only has restricted non-preserved benefits or preserved benefits can only fully commute their TRIS and either
- retain the amount of the commutation lump sum to accumulate within the super system
- commence another non-commutable income stream or TRIS from the SMSF or from another complying super fund.
- receive a lump sum super benefit if either the
- member has met a condition of release with 'Nil' cashing restrictions
- amount of the lump sum does not exceed their unrestricted non-preserved benefits.
When the commutation lump sum is returned to accumulation in the SMSF, the tax-free and taxable components will need to be recalculated whenever a new benefit is paid from the fund.
Pensioner in receipt of a TRIS dies
A TRIS ceases as soon as a member in receipt of the pension dies, unless a dependant beneficiary is automatically entitled under the SMSF's trust deed or the rules of the pension, to receive the pension upon the member's death. For example the member's spouse may be paid the member’s benefits in the form of a pension. This is called an auto-reversionary pension. When a TRIS is an auto-reversionary pension, on the death of the member in receipt of the pension, the:
- pension will no longer be non-commutable or subject to the maximum annual pension payment limit as a condition of release with 'Nil' cashing restrictions (that is, death) has been satisfied
- tax-free and taxable components of the auto-reversionary pension will continue to be in the same proportions as determined when the TRIS commenced
- trustee must ensure that the minimum annual pension payments continue to be made. In the year the member dies, the minimum annual pension payment amount is based on the member's age. In subsequent years, it is based on the age of the dependant beneficiary who became automatically entitled to receive the pension upon the member's death.
When a TRIS is not an auto-reversionary pension, the TRIS ceases as soon as the member in receipt of the pension dies. When that happens the trustee does not need to make the minimum annual pension payment unless required to do so by the SMSF trust deed.
Issues a self-managed super fund (SMSF) trustee needs to consider when commencing, running and stopping a transition to retirement income stream (TRIS) in the form of a pension.
Version history for this content page
06 December 2016
Reflects superannuation reforms passed by Parliament on 23 November 2016.