Transition to Retirement Income Streams

A Transition to Retirement Income Stream (TRIS), also known as a TRAP or a TRIP, is an account based pension with restrictions.  It is possible to commence a TRIS without meeting a full condition of release.

In most cases, people who commence a TRIS will have reached preservation age but are continuing to work or contribute to their SMSF.  The advantage of commencing a TRIS is that members can sacrifice their salary and wages to Superannuation reducing their taxable income while withdrawing the same or similar amounts from their pension account to keep the same level of personal income.  The higher the personal taxation bracket of the member the greater the tax advantage this strategy provides.

Pensions paid from Superannuation will be added to the personal income of the member up until the member turns 60, and a rebate is given for tax already paid.  Contributions to the SMSF are usually 15% depending on your personal income.

Minimum Annual Payments

You must pay a minimum amount each year to a member from that member’s pension account.

The minimum amount is worked out by multiplying the member’s pension account balance by a percentage factor. The amount is rounded to the nearest 10 whole dollars.

The following table shows the relevant percentage factor based on the member’s age.

Pension Features

Cashing restrictions are in place on this type of pension. A maximum withdrawal limit of 10% per annum based on the members balance at the start of the period in question (either date of commencement or the beginning of the new Financial year) is in place on this type of pension. Currently the age of 55 (this age is rising) is the preservation age at which this type of pension can commence.

Considerations

People commencing pensions must have the means to withdraw cash equivalents of the pension minimum amounts from their SMSF to satisfy pension minimums.  It is always best to seek professional advice to determine if establishing an account based pension is right in your circumstances.