Transition-to-retirement income streams (TRIS) are set to make a comeback for retirees despite having fallen out of favour since ceasing to be eligible for tax exemptions in 2017.
“We are now seeing individuals with carry-forward unused concessional contributions starting to build up that will enable [them] to start leveraging the marginal tax rates to get that benefit out of the TRIS again,” Smarter SMSF chief executive Aaron Dunn said today during the Smarter SMSF Virtual Day 2021.
“Of course, it’s not going to go back to what it was necessarily prior to 1 July 2017 because we don’t get that same level of tax exemption that we did previously.”
He pointed out TRIS held potential benefits for retirees aged 60 years or over in particular because they would receive their benefit payment out of the fund as non-assessable, non-exempt income.
“The fact that we had our contribution caps continue to decline, the reduction in that strategy has clearly been contracting over that period, but we are starting to see some small increments with our contribution cap going forward,” he added.
“It’s this catch-up concessional contribution now that really starts to open up this as a strategy. It may be one year, it may be over multiple years, but there is a leveraged benefit that we would be able to obtain.”
The success of this strategy also required the individual’s total superannuation balance to be less than $500,000 at the end of the previous year, he noted.
“This is a rolling five-year amount that will accrue in respect to any unused concessional contribution cap. This legislation of course started on 1 July 2018, so in theory our first year of unused amounts occurs in the 2019/20 year,” he said.
“A member turning age 60 may have the benefit of large effective concessional contribution caps that can then look to be used. In particular, you might have a client who hasn’t worked for some period of time, but they have the ability to contribute and claim a deduction as well, all the way through to age 67 now.”
Last year, Challenger head of technical services Andrew Lowe said TRIS were still a useful strategy for pre-retirees and their impact would increase over time despite the loss of tax-free earnings applied to them post-2017.
