The Treasury Laws Amendment (2017 Measures No. 2) Bill 2017 has been tabled in Parliament. The Bill proposes to make two important changes to transition to retirement income streams (TRISs). Firstly, to allow certain TRISs to qualify for “retirement phase” and, secondly, to ensure TRISs qualify for the cost base reset.

Under the new super laws, TRISs do not qualify for “retirement phase” and therefore assessable income attributable to a TRIS, from 1 July 2017, will be taxable to the fund. The problem with this is that a TRIS is always a TRIS and therefore even though a member may subsequently qualify for an account based pension (eg turning 65) their TRIS will not be in retirement phase. The proposed changes alter this by including in retirement phase a TRIS where the member has subsequently met a full condition of release. For members turning 65 this change will occur automatically. For other full conditions of release (retirement, terminal illness and permanent incapacity) the member will have to notify the fund that the full condition of release event has occurred.

This measure is welcome in the sense that members won’t have to commute TRISs and start account based pensions. However, it will increase complexity for funds as there will now be two forms of TRISs, those that are in retirement phase and those that aren’t. In addition, funds will have to ensure that TRISs automatically transfer into retirement phase when a client turns 65. For other conditions of release events members will have to ensure they notify their fund.

The second proposed TRIS measure corrects a defect in the new laws that potentially meant that assets supporting TRISs would not qualify for the cost base reset on 30 June 2017. The changes ensure that the cost reset will be available even if the TRIS is not commuted on 30 June 2017 (and ceases to be in retirement phase on 1 July 2017).

To discuss this further or for more information please contact:

Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pbroderick@sladen.com.au

Melissa Colaluca
Associate
Sladen Legal
T +61 3 9611 0161
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: mcolaluca@sladen.com.au