A leading SMSF technical specialist has confirmed trustees who do not fulfil their obligation to adhere to the rules regarding minimum and maximum drawdowns from a non-retirement-phase transition-to-retirement income stream (TRIS) face severe penalties.
“Not paying your minimum for a retirement-phase pension means you don’t get to claim ECPI (exempt current pension income). But not paying out a minimum pension for a TRIS that is not in retirement phase, or going over the maximum drawdown allowed, means the payments are all treated as lump sums,” Accurium head of SMSF education Mark Ellem noted.
According to Accurium senior SMSF educator Anthony Cullen, failing to satisfy requirements will constitute a failure to meet the pension standards.
“It will be deemed the pension never existed so those benefits become lump sum payments of a preserved amount, which in turn constitutes illegal early access,” Cullen noted.
Ellem told delegates at the recent SMSF Professionals Day 2024, co-hosted by selfmanagedsuper and Accurium, any payments from the TRIS will, as a result, be fully assessable to the member at their marginal tax rate without having any conditions associated with the retirement savings environment being taken into account.
“In these situations there is no reference to the tax-free and taxable component and it doesn’t matter if the person is over age 60,” he said.
“So say the trustee is 62 but hasn’t met a retirement condition of release and they start a TRIS, but don’t take out the minimum amount, or the person takes out over the maximum allowed, they can’t say I’m over 60 so it’s tax-free.
“No. It’s not treated as a super payment and it’s now just statutory income and there will be no 15 per cent tax offset for it having come from the superannuation environment.
“So it’s all bad.”
