General / Oct 19, 2020

There’s still life in the Transition to Retirement Strategy

Duc Hong
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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.

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