Taxpayers interested in making their transition-to-retirement income stream (TRIS) payments tax free by treating them as a lump sum have been warned by an expert SMSF lawyer to obtain a private binding ruling (PBR) before pursuing the strategy.
If someone is between preservation age and 60, generally TRIS payments are taxable.
However, regulation 995-1.03 under the Superannuation Industry (Supervision) Regulations suggests there was a way for them to be treated as a lump sum, which in turn can make the amounts tax free under the low rate cap amount.
DBA Lawyers director Bryce Figot said a recent article suggested the ATO has issued a PBR confirming the strategy was possible.
However he added there had been conflicting material as to whether a TRIS payment could be treated as a lump sum.
“The ATO were asked this question in 2009,” Figot said.
“Their response suggested that the ATO don’t allow this strategy.
“Further, even if one taxpayer receives a positive PBR ruling, no other taxpayer can rely on it.”
In addition, Figot said the explanatory statement that accompanied reg 995-1.03 stated “an amount which a person elects to take as a lump sum does not count against the minimum drawdown requirements”.
