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ATO cautions SMSF trustees about transition to retirement streams

Posted on 22 April '16 by , under General News.

The ATO has issued a statement expressing its concern over recent misrepresentations of transition to retirement income streams (TRIS) and how they are meant to operate.

In its statement, the ATO said that under special circumstances a member can select under regulation 995-1.03 of the Income Tax Assessment Regulations (ITAR) 1997 to treat a TRIS payment as a super lump sum and access the low rate cap.

Members who choose to make this election for income tax purposes must recognise that the nature of the payment from the SMSF does not change for the purposes of the super regulatory law.

The tax office has warned that the complexity surrounding these transactions give rise to a number of issues that trustees need to consider to ensure their SMSF’s compliance with superannuation regulatory and income tax laws.

In particular, the ATO reminds trustees that:

  • it is the nature of a TRIS payment for superannuation regulatory law purposes that is relevant to a trustee’s compliance with the 10 per cent TRIS payment annual limit

  • if the TRIS payment is not a lump sum for super regulatory law purposes, it cannot be paid by an in-specie asset transfer

  • electing for a TRIS payment to be treated as a super lump sum for income tax purposes may affect the amount of the SMSF’s exempt current pension income for an income year and whether particular fund assets are segregated current pension assets

  • electing for a TRIS payment to be treated as a superannuation lump sum for income tax purposes will affect which super-related tax offset/s may apply to the payment