Transition to retirement
Income streams for transition to retirement
Super may be accessed from preservation age using any of the following income streams, which are all generally non-commutable:
|A transition to retirement income stream (post 1 July 2007)||May be commuted after meeting a full condition of release (eg age 65)|
|A non-commutable allocated pension or annuity (pre 20 September 2007)||May be commuted after meeting a full condition of release (eg age 65)|
|A non-commutable pension or annuity||Always non-commutable*|
The transition to retirement income streams in the table above, are collectively referred to as 'TRIS' from 1 July 2017. These income streams are not 'retirement phase' income streams for tax purposes unless one of the following conditions of release has been met:
- Reaching age 65
- Terminal medical condition
- Permanent incapacity.
From 1 July 2017, TRIS that are not retirement phase income streams do not qualify for a tax exemption on the earnings on assets supporting the income stream. In addition, they do not count as a credit against the transfer balance account.
Transition to retirement income stream
A transition to retirement income stream is an account-based income stream or annuity commenced on or after 1 July 2007. The total amount of payments in any year are limited to a maximum of 10% of the account balance at the start of each financial year.
This maximum payment is not required by legislation to be reduced on a pro-rata basis if the transition to retirement income stream is started or commuted part way through the year.
The minimum income payments for a transition to retirement income stream is 4% of the account balance at the start of the financial year. If the income stream is commenced part way through a financial year the minimum payment is determined based on a pro-rata basis. A transition to retirement income stream must meet the new post 1 July 2007 account-based pension and annuity standards.
Income stream payments always treated as income stream benefits for tax purposes
Prior to 1 July 2017, it was arguably possible for a client receiving a transition to retirement account based pension to elect for their regular pension payments to be taxed as superannuation lump sums.
From 1 July 2017, it is no longer possible to make this election, and any payment from an income stream (excluding commutations) is taxed as a superannuation income stream benefit.
Commutations don't count towards minimum payment requirement
Another change from 1 July 2017 is that both partial and full commutations of an income stream received by a member are always superannuation lump sums for tax purposes. Prior to this date, partial commutations were taxed as superannuation income stream benefits unless an election was made by the member.
From 1 July 2017, partial commutations do not count towards the minimum payment requirement of a transition to retirement income stream.
Non-commutable allocated pension or annuity
A non-commutable allocated pension or annuity is an allocated pension or annuity commenced prior to 20 September 2007, which the trustee made non-commutable for the purposes of transition to retirement.
Non-commutable pension or annuity (formerly complying)
A non-commutable pension or annuity is one of the following types of complying income streams:
- life expectancy, or
- term allocated.
Non-commutable pensions or annuities commenced prior to 20 September 2007 received beneficial treatment for social security and were referred to as 'complying'. For income streams commenced on or after 20 September 2007, generally only non-commutable annuities are complying for social security purposes. See section 18 for more information on the social security treatment of income streams.
Last modified: Thursday, January 11, 2018