Speaking in a webinar, DBA Lawyers director Daniel Butler said that ever since the passage of Treasury Laws Amendment (2017 Measures No. 2) Bill 2017 in June 2017, both the ATO and Treasury have held the view that if a member with a TRIS satisfies a “nil” cashing restriction and commences to be in retirement phase, the income stream does not cease to be a TRIS.
This view is in contrast to the common legal view that’s been in place for 10 years, Mr Butler said, that if appropriate documents are in place then the TRIS does not need to be commuted and will convert to an account-based pension automatically.
“A TRIS is an account-based pension but with two extra conditions which fall away, so the TRIS is an account-based pension, and as long as you have the right documents, the TRIS automatically converts,” the director explained.
This point continues to be debated, Mr Butler said, with a number of professional bodies and SMSF practitioners lodging submissions to the ATO and Treasury to change their position.
In the current environment, however, Mr Butler said SMSF practitioners wanting to take a conservative view and “toe the line” have to commute a TRIS and restart the pension for their clients that want to convert it into an account-based pension.
“There is a lot of cost with that and it also gives rise to a statement of advice,” the director said.
“So, it’s a very unfortunate situation we have because it gives rise to a lot of cost, unnecessary paperwork and complexity, when the right answer is for it to be an auto-conversion.”
How does the $1,600,000 pension limit affect TRIS accounts? If a 60 year old currently has $1.6m in a TRIS that grows to $2.0m at 65 will they have to Commute $400,000 back to Accumulation?
This is an area that we find is causing significant confusion.
I’d be interested in getting some clarity on whether there is actually any practical difference between a TRIS with nil cashing restrictions (i.e. the member has met a full condition of release) and an Account Based Pension. The ATO website states that:
“From 1 July 2017, a TRIS where the member has not met a condition of release with a nil cashing restriction will not be considered in the retirement phase. Earnings from assets supporting a TRIS that is not in the retirement phase are not eligible for ECPI and will be taxed at 15%. This will apply to all TRIS regardless of the date the TRIS commenced.”
By specifically noting that a TRIS where the member has NOT met a condition of release will not be considered in retirement phase, it implies that a TRIS where the member HAS met a condition of release it will be considered in retirement phase.
If the TRIS is counted as retirement phase, it should also be included in the ECPI calculation and have no real practical difference to an Account Based Pension.
Any feedback would be really appreciated.
Over Complicated O’Dwyer, her Treasury and ATO buddies with their gold plated CSS Lifetime pensions need to pull their heads out of their fictional Canberra theoretical world and make common sense of these overly complex TRIS rules.
What are they going to do, go back 10 years and stop the past ten years of auto conversions from TRIS to ABP. People then taking more than 10% pensions, etc
It’s impossible, it’s stupid, it’s ODwyer to a tee.