Identify and Report All TRIS Accounts in Accumulation Phase to the ATO Via
advice
business / SOFTWARE DEVELOPERS / advice / UNCLASSIFIED
Segment / audience / Format / Classification
CHANGE Advice
Reference No: / 2018-SPR003
Title: / Strengthen integrity of income streams
Version No: / 1.0
Document Date: / 21/08/2017
CHANGE IMPLEMENTATION DATE / 1/07/2018
TAX MEASURE COMMENCEMENT DATE / 1/07/2017
CURRENT STAGE / CONCEPTUAL
HIGH LEVELDESIGN
REQUIREMENTS ANALYSIS
DETAILED DESIGN
LIKELIHOOD / DRAFT
LIKELY
DEFINITE
Channels affectedExternal Tax Software products affected
ELS Fringe Benefits Tax (FBT)
SBR Resource Rent Tax (RRT)
ECI Income tax
eSAT Business Accounting systems
Portal Superannuation Systems
Prefill data Payroll systems
Calculators Corporate enterprise systems ( e.g. finance/ HR)
Paper Forms
Outbound Correspondence
IMPORTANT. Information in this advice is draft only and subject to change. It is provided under the terms and conditions of the ATO Software Developers Homepage( ) and noted in the footer below
DEPENDANT LEGISLATION
Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016
Treasury Laws Amendment (2017 Measures No. 2) Act 2017: superannuation reform package amending provisions
BACKGROUND INFORMATION/POLICY INTENT
Transition to retirement income streams (TRIS)allowspeople who have reached their preservation age to have access to their superannuation benefits without having to retire or leave their job. A TRIS is essentially an account-based pension from which lump sum payments can only be made in limited circumstances. It also has a maximum annual payment limit.
Similar to other income streams, where a fund is liable to make TRIS payments , some or all of the fund's income and capital gains may be treated as exempt current pension income (ECPI).
TRISs were intended to help older workers transition to retirement through reducing their working hours and supplementing their lost salary income with a superannuation income stream. In practice TRISs have been used to reduce tax (including through the pension phase earning tax exemption) without a reduction in working hours of recipients.
As part of the 2016 Budget, the government announced changes to the treatment of income streams. The intent of these changes was to ensure that they were not accessed primarily for their tax advantage, and still meet the objective of supporting people.
Changes include:
•The tax exempt status of income from assets supporting a TRIS that is not in retirement phase has been removed. A TRIS is not in the retirement phase when the member has not reached age 65 or has not notified their fund that they have met any of the retirement, permanent incapacity or terminal illness conditions of release(carve-outs apply so that other non-commutable income streams are not affected).
•Earnings from assets supporting a TRIS not in the retirement phase will now be assessable income of the fund and will be taxed at 15% regardless of the date the TRIS commenced
•Individuals will no longer be allowed to treat certain superannuation income stream payments as lump sums for tax purposes which currently makes them tax-free up to the low rate cap ($195,000).
•Full or partial commutations of superannuation income streams will be treated as superannuation lump sums.
•Lump sum payments will not count towards an individual’s annual minimum pension payments.
These changes take effect from 1 July 2017.
BUSINESS REQUIREMENTS SUMMARY
- Funds must ensure that the earnings on assets supporting a transition to retirement income stream that is not in the retirement phase(i.e. the member has not turned 65 or met a nil condition of release (excluding death) and have notified their fund) are not treated as tax exempt - they must be taxed at 15%.
- Where a TRIS is not eligible for the earnings tax exemption, costs may now be deductible.
- Identification of the point in time that a TRIS stops being in the accumulation phase and enters the retirement phase and has assets eligible for earnings tax exemption begins (ie TRIS cannot ‘morph’ or ‘auto-convert’ into an account based pension – need to be able to identify the start date of when the TRIS moves into retirement phase – when the member turns 65 or meets a nil condition of release and notifies the fund - and its value at that time).
- Identify and report all TRIS accounts in accumulation phase to the ATO via:
- Member account attribute service (MAAS) – APRA Funds to report TRIS accounts not in retirement phase
- SMSF annual return - New label from 2017-18 financial year onwards to provide the number of accounts that are TRIS products not in retirement phase (i.e. the member has not turned 65 or met a nil condition of release that they have notified their fund about) for each member.
- Instructional changes to existing forms:
- Fund income tax return - Section B label Y instructional changes only - provide details on the new legislative requirements that removes the tax exempt status of earnings that support a TRIS when the TRIS is not in the retirement phase.
- SMSF annual return - Section A Q10 and Section B label Y instructional changes only - provide details on the new legislative requirements that removes the tax exempt status of earnings that support a TRIS when the TRIS is not in the retirement phase.
CONCEPTUAL VIEW (High Level Design)
N/A
DETAILED DESIGN
N/A
Names of Forms impacted:
Member Account AtributeService(MAAS)
SMSF annual return and instructions
Fund income tax return and instructions
UNCLASSIFIED / This A controlled information resource WHICH is information that is not yet available to the general public, IT is made available to software developers for the sole purpose of assisting in the development of tax-related software (both commercial and in-house).
In some cases the information is in draft form or has been made available for the purposes of consultation, proof of concept work and or pilots.
HOLDERS OF THIS DOCUMENT should not on-forward controlled information to persons or organisations outside THEIR own organisation OR FOR OTHER PURPOSES. See / PAGE
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