The Government has released draft legislation allowing reversionary Transition to Retirement Income Streams (TRIS) to be paid to dependant beneficiaries whether they satisfy a condition of release or not.
Currently a reversionary TRIS can’t be paid to a dependant if that dependant hasn’t satisfied a condition of release. This was a result of the changes applying from 1 July 2017 preventing the Exempt Current Pension Income rules (ECPI) applying to TRISs.
However, as the draft Explanatory Memorandum (EM) notes, dependents can receive a new pension without satisfying a condition of release.
“The inability for a TRIS to automatically revert in this situation has resulted in administrative difficulties for funds and potentially requires recently bereaved dependant beneficiaries to engage with their superannuation quickly,” says the EM.
Following the releases of the draft legislation, Minister for Revenue and Financial Services Kelly O’Dwyer said: “Allowing a TRIS to automatically revert in all cases will simplify administrative processes for superannuation funds. It will also make it easier for superannuation members by eliminating the need for recently bereaved dependants to quickly engage with the super affairs at what is a particularly difficult time.”
The draft legislation, the Treasury Laws Amendment (Measures For A Later Sitting) Bill 2018 – Miscellaneous Amendments – Transition To Retirement Income Streams, amends the list of situations in which a pension isn’t in the ‘retirement phase’ – a concept introduced by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016.
“This technical change is further evidence of the Government’s commitment to ensuring the smooth implementation of the 2016-17 Budget superannuation taxation reform package,” said Minister O’Dwyer.
The draft Explanatory Memorandum says “in practice, the amendment largely applies from 1 July 2017, being the time from which the retirement phase definition generally became relevant”.
“The retrospective application of the amendment is appropriate as it is wholly beneficial to superannuation providers and reversionary beneficiaries, who will have a greater range of options in dealing with the superannuation interests of deceased members.”
SMSF Association CEO John Maroney said the change is a “positive initiative” and was a key element in the Association’s pre 2018/19 Budget submission.
“As the Association said in its budget submission, ‘it gives beneficiaries 12 months before the pension is credited to their TBC, reduces documentation and compliance burden and rightfully places these pensions into the same legal position as reversionary account-based pensions (ABPs)’,” said Mr Maroney.
“We look forward to making a submission on the draft legislation and call for the remainder of our superannuation red-tape issues in our Pre-Budget submission to be actively considered.”
The consultation period opened on 12 February and closes on 23 February. The House of Representatives is sitting in the week starting 26 February.