Forman Financial Services

The ATO view on TRIS “Conversion” may cause issues

In our previous articles we explained the difference between the two account based versions available to SMSF members post 1st July 2017 which is the Transition to Retirement Income Stream (TRIS) and the Exempt Current Pension Income Stream (ECPI)

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We also explained that the TRIS can adopt the ECPI more favourable tax treatment without the need to re-establish the pension when the member meets the condition of release.

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It is important however to understand that the ATO accepts that the TRIS can adopt the ECPI’s more favourable tax treatment when the member meets the condition of release.  However the ATO holds the point of view that the TRIS does not convert to ECPI Account Based Pension (ABP).  The issues raised from the ATO point of view can surface when the member dies and the TRIS had a reversionary beneficiary and this beneficiary has not met the condition of release.  In this situation the favourable tax treatment may be lost.   One of the possible solutions to fix this potential issue is to commute TRIS and establish the EPCI when the condition of release is met instead of using the “conversion approach”.  However like anything to do with Super one should receive advice before taking action.

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