A bill containing an amendment to fix an unintended consequence of the super reforms has now be passed by both houses.
Treasury Laws Amendment (2018 Measures No.4) Bill 2018, contained a legislative fix for an issue relating to reversionary TRISs to ensure that reversionary TRISs can always be paid to a reversionary beneficiary, irrespective of whether they have satisfied a condition of release.
While the bill was passed by the Senate last year, there were of amendments that were made to the bill by the Senate which needed to be approved by the House of Representatives. The amendment details have now been passed by the House of Representatives.
The bill modifies the rules that determine when a TRIS is in retirement phase by ensuring that a reversionary TRISs can always be paid to a reversionary beneficiary, irrespective of whether they have satisfied a condition of release.
The change will allow a reversionary TRIS to be paid to a dependent beneficiary rather than having to be commuted and a new income stream started from the deceased member’s underlying superannuation interests. This approach is consistent with the treatment of other superannuation income streams, which do not require the reversionary beneficiary to satisfy a condition of release.
Previously speaking to SMSF Adviser, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said its still unclear what will happen in situations where the member had already been impacted by this issue.
“The legislation is a great thing because it sorts out the technical problem with reversionary transition to retirement income streams, but backdating it may [be difficult], as some people may have already been paid out their benefit,” he said.
“What do we do with those that have missed out merely because they didn’t meet the rules at the time, but now because of the way these new rules work should have been included under those rules
The bill allows the commissioner to issue directions to pay unpaid superannuation guarantee and undertake superannuation guarantee education courses to employers who have failed their superannuation guarantee obligations.
It also allows the commissioner to disclose more information about superannuation guarantee non-compliance to affected employees.
The ATO formed a view in TR2013/5 about when a pension starts and stops. So, a TRIS, once started, does not stop unless commuted. The super laws define a TRIS as including a 10% maximum drawing until a condition of release with a nil cashing event occurs. The 10% cap falls away but, the pension continues.
SIS is due for a revamp, it is 25 years old which is a lifetime in super law. If attention isn’t paid to it, the ATO will continue to encroach on the rules for super via the interpretation of the Tax Act.
It seems to me that ATO can decide whatever it wants as it suits them. And if it doesn’t like it, then the law will be changed to suit what it wants. Surely the ATO/govt could decide that a TRIS changes to an ABP as soon as a condition of release is met regardless of what the establishment minutes say. Seems simple to me.
Hi Kym, now this silly TRIS reversionary problem is solved.
Can you please clarify what is the difference(s) between a TRIS Retirement and an ABP ?
Given that the standard industry practise since 2006 has always been to the change from TRIS to ABP on condition of release and there is still multiple major Wrap platforms that simply change the TRIS to an ABP in these circumstances.
I’m confused but more to the point the Govt seems incredible confused.
A TRIS is an ABP and the legislation lets the cashing restriction drop away, which means that it does not need to be commuted to continue running when the benefit becomes URNP.
[The EM that accompanied the 2007 law change stated: Under the new standards, income streams effectively fall into two classes – [i]those where there is an account balance attributable to the recipient and those where there is not. [/i]]
The key to this is that the TRIS does not stop as a result of the cashing restriction lifting.
To get a TRIS to loose the sub-categorisation requires a commutation and a restart. Most have assumed that the pension documentation auto converting it was sufficient however, the ATO is taking a literal interpretation on this one.
No harm done, a TRIS is an ABP so, it is really only semantics once the benefit is in retirement phase.
Yep stupid govt bloody semantics trying to change 13 yrs of normal application and function of reality. How these morons justify their existence with overly stupid and complicated BS for zero benefit.
The difference is the removal of the 10% maximum limit that applies to a TRIS but not to an ABP. And I agree. The govt is very confused.
And the Govt morons still persist with this Stupid TRIS pre and post Retirement it seems.
A TRIS post retirement is a bloody ABP.
Only these govt clowns to Over Bloody Complicate it soooooooooo much !!!!!!!!!!