The recent draft laws on reversionary transition-to-retirement income streams (TRIS), if enacted, will eliminate the adverse result of decreasing the reversionary beneficiary’s chance of receiving Centrelink benefits, or missing out altogether.
The federal government’s exposure draft legislation, released last month, allows a reversionary TRIS to automatically be transferred to an eligible dependent upon the death of the member receiving the pension without the beneficiary having to satisfy a condition of release.
Currently, a reversionary TRIS cannot transfer to a dependant if the dependant has not satisfied a condition of release.
“Adverse Centrelink treatment would arise if the reversionary TRIS was commenced before 1 January 2015 and therefore would be assessed under the previous ‘deductible amount’ test [rather than] the deeming test, which currently applies,” SuperCentral superannuation special counsel Michael Hallinan said.
“As a general statement, the deeming test is less generous than the ‘deductible test’.
“Consequently, a reversionary beneficiary who was entitled to the age pension may have had the amount of the age pension reduced or, in extreme cases, eliminated.
“The government has now moved to resolve the issue of reversionary TRISs, which has been dragging on since 1 July 2017 when the Fair and Sustainable Superannuation changes commenced.”
Hallinan said if the change is implemented, then on the death of the primary beneficiary of a reversionary TRIS, the pension can transfer to the reversionary beneficiary as the pension will be treated as being in retirement phase, irrespective of whether the reversionary beneficiary has satisfied an unrestricted release condition.
The draft legislation proposes the change be retrospectively applied from 1 July 2017.