There’s still life in the Transition to Retirement Strategy
Posted on 10 October, 2020
by Duc Hong
The changes introduced from 1 July 2017 meant that assets supporting a TRIS are no longer exempt from tax. While that was a significant change, there are still circumstances where the TRIS strategy can be effective.
Elements to consider when implementing a Transition to Retirement strategy include:
- Members must have reached preservation age
- For those under 60 the TRIS may result in additional taxable income, however a 15% tax offset will generally be available
- For those over 60 the TRIS income is tax-free
- The maximum TRIS payments each year are limited to 10% of the account balance.
The strategies that can be used with a TRIS include:
- Maximising super contributions in a tax effective way whilst not reducing net income received. Contributions can be salary sacrifice or personal concessional
- Trustees may allow unused carried forward concessional contribution caps to be fully utilised
- Mini withdrawal / re-contribution strategy to increase tax free components;
- Benefit splitting, including with a younger spouse where their account balance may be able to be quarantined for Centrelink purposes
- Supplementing lost income where a taxpayer reduces their working hours from full-time to part-time
- Utilising super to pay down debt.
As at October 2020, anyone born on or before October 1962 would be eligible to commence a Transition to Retirement Income Stream.