New guidance from the ATO on whether a transition-to-retirement income stream (TRIS) changes into a different kind of superannuation income stream in retirement phase has been questioned by a legal expert, who has claimed there was not a strong basis in the law for the guidance.
DBA Lawyers senior associate William Fettes made the claim as part of a webinar late last week in reference to ATO Guidance Note 2019/1, which was published on 3 July.
The note stated a TRIS does not convert into any other form of superannuation income stream when it moves into retirement phase and would continue to satisfy the definition of a TRIS.
Additionally, a TRIS would only be ‘converted’ to another kind of superannuation income stream if it was ceased and a new super income stream was commenced, according to the guidance note.
The ATO also stated any regulatory restrictions particular to a TRIS, including the 10 per cent maximum annual payment and commutation restrictions, would automatically fall away once a member met a condition of release. This change, however, would still be subject to either or both of the governing rules of the fund and the agreement or standards under which the TRIS is provided.
With the removal of the limitations, the TRIS would have the same restrictions and requirements as an account-based superannuation income stream, the guidance note stated.
While Fettes said this was a “strong statement from the ATO”, he was unsure of the legal standing of the position adopted within the note.
“I don’t know if they have a really strong basis in the law for asserting that an income stream commenced as a TRIS cannot satisfy the definition of an account-based pension (ABP) under Regulation 1.06 (9A) at a particular future point in time,” he said.
“The way the regulations are drafted as definitions, they are nested and talk about the standards and governing rules of the pension, and providing certain standards are being satisfied, there is no reason a particular income stream is not adaptable to any particular definition in the Superannuation Industry (Supervision) Regulations.”
Fettes also pointed out the issue may not be a problem if there is nothing to be mindful about when considering an ABP or TRIS in retirement phase.
“Given the ATO view in the note, and on their website in other publications, that the restrictions fall away from the TRIS when a full condition of release is met, providing our documents don’t say something different, a TRIS in retirement phase is broadly identical to an ABP,” he said.
He said the only concern was notification requirements to trustees that still had to take place in some cases, and that key differences in the past between an ABP and TRIS had been dealt with by changes to the Income Tax Assessment Act (ITAA) resulting in a reversionary death benefit TRIS always being in retirement phase effectively removing any difference that remained between an ABP and an exempt TRIS.
