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- Are you ready to transition to retirement?
In July 2017 the government took away some of the tax incentives for transition-to-retirement income streams (TRIS), but it’s still worth considering if this vehicle could help you transition into retirement.
The Federal Government introduced TRISs on 1 July 2005 to assist Australians ease into retirement. A TRIS is a type of pension that allows individuals to access some of their superannuation benefits while they are still working.
Am I eligible?
You can start a TRIS if you are working and have reached your preservation age. Your preservation age will be between ages 55 and 60 inclusive, depending on when you were born.
| Date of birth | Preservation age |
| Before 1 July 1960 | 55 |
| 1 July 1960 - 30 June 1961 | 56 |
| 1 July 1961 - 30 June 1962 | 57 |
| 1 July 1962 - 30 June 1963 | 58 |
| 1 July 1963 - 30 June 1964 | 59 |
| 1 July 1964 and onwards | 60 |
How much can I withdraw?
You must withdraw a minimum pension amount each year, based on your age (for those under 65, the minimum is at least 4% of your superannuation benefits). The most you can withdraw each year is 10% of your benefits. These minimum and maximum limits are calculated when the TRIS commences and then re-calculated annually on 1 July. Note that lump sum withdrawals are not permitted.
How will I benefit?
A TRIS may provide you with greater financial flexibility. Having access to your superannuation means you can reduce your work hours whilst maintaining your current income. Alternatively, you may want to continue full-time employment and supplement your current income. You may even want to adopt a tax-saving strategy whereby you salary sacrifice your wage and use a TRIS to meet your living expenses. There are several options available, so you decide what is best for you!
How will my superannuation fund benefit?
Your superannuation fund will no longer obtain any benefits from you commencing a TRIS. This is consistent with the original intention of a TRIS, being to assist individuals nearing retirement. Prior to 1 July 2017, a TRIS created tax benefits for superannuation funds because investment earnings on assets supporting a TRIS were tax-free.
Will I be taxed?
If you are under age 60, the taxable amount of your TRIS will be included in your income tax return and you will pay tax accordingly. You will receive a 15% tax offset though, reducing the rate of tax that you will pay. Once you are age 60, your TRIS will be tax-free.
When will the TRIS end?
Once you are age 65, all of your superannuation benefits will become unrestricted and your TRIS may be converted to an account-based pension. This means you will have no restrictions on the maximum amount that you can withdraw.
Alternatively, you may stop your TRIS if your circumstances change and roll the benefits back into your accumulation account.
What else should I consider?
- Ensure your superannuation fund can accommodate a TRIS.
- Ensure there will be no impact on any life insurance policies held by your superannuation fund.
- Determine the financial and lifestyle goals that you want to achieve and your associated income needs.
- Consider how existing government entitlements will be affected.
Where can I find more information?
We have superannuation experts in each of our offices who can assist you with any questions on your TRIS, or to determine if commencing a TRIS will be a suitable strategy for you.
Adelaide:
Stephen Kuchar
Partner - Private Advisory
D +61 8 8372 6550
E stephen.kuchar@au.gt.com
Brisbane:
Dennis Eagles
Partner & National Head of SMSF
D +61 7 3222 0242
E dennis.eagles@au.gt.com
Cairns:
Deanne Quinn
Senior Manager - Private Advisory
D +61 7 4046 8812
E deanne.quinn@au.gt.com
Melbourne:
Sharon Gdanski
Director - Private Advisory
D +61 3 8320 2230
E sharon.gdanski@au.gt.com
Perth:
Simon Gow
Director - Private Advisory
D +61 8 9480 2059
E simon.gow@au.gt.com
Sydney:
Kirsten Taylor-Martin
Partner - Private Advisory
D +61 2 8297 2567
E kirsten.taylor-martin@au.gt.com
