Amendments to the federal government’s treatment of limited recourse borrowing arrangements (LRBA) and transition-to-retirement income streams (TRIS) under the incoming superannuation changes passed through both houses of Parliament last week.
On 15 June, the Treasury Laws Amendment (2017 Measures No 2) Bill was put into effect, supporting “the integrity of the new transfer balance cap by including a repayment of a borrowing under a LRBA in the cap in certain circumstances”.
An individual will receive a transfer balance credit where a super provider makes a payment in respect of an LRBA that increases the value of a super interest supporting a retirement-phase super income stream, the bill said.
The change ensures the transfer balance cap captures the shift of value that occurs where liabilities arising from the LRBA are paid using accumulation-phase assets.
This is consistent with the way transfers from assets that do not support a super income stream – accumulation-phase assets – are treated when a super income stream is commenced.
The changes only apply to borrowing arising under contracts entered into on or after 1 July.
The amendments bill also modifies the rules that provide the circumstances in which a super income stream is in the retirement phase.
The amendments enable a TRIS to be in the retirement phase where the recipient of the super income stream has satisfied a relevant condition of release with a nil cashing restriction.
An individual must also notify their super income stream provider that they have satisfied a condition of release with a nil cashing restriction, other than the condition related to reaching the age of 65.
The conditions of release that are relevant in this context are retirement, terminal medical conditions, permanent incapacity and turning 65.
Further, the period in which an asset supporting a TRIS can cease to be a segregated current pension asset of a fund and still qualify for capital gains tax (CGT) relief is extended to include the start of 1 July.
The change ensures the CGT relief provisions apply as intended to segregated assets that support TRISs prior to the TRIS changes coming into effect.
Extending the period to the start of 1 July recognises the change for TRISs will apply from 1 July without any action being taken by the holder of the TRIS or the entity that provides it.
