Can i commute a transition to retirement pension

Services Australia Centrelink assesses the lump sum arrears payment from 2 October to 31 October, which is the period it relates to. As a result of the assessment, a debt is generated for Mrs Jones during the bereavement period.

The legislative instrument allows Services Australia Centrelink to waive the debt. A regular disability benefit paid as a series of ongoing payments by a superannuation fund where the payment is based on a person's entitlement from an insurance policy whether purchased by the superannuation fund on the person's behalf, by their union, or by their employer is NOT an income stream and is assessed as ordinary income.

These benefits are also known as salary continuance benefits or income protection benefits. An invalidity or TPD benefit paid as a lifetime pension is assessed as an income stream. Payments from the income stream are assessed from the date the person was notified by their superannuation fund about the approval of their invalidity or TPD pension.

It is not the date that the person applied for the invalidity or TPD benefit. Act reference: SSAct section 8 Income test definitions, section 9 1 -'income stream'. Policy reference: SS Guide 1.

Pre-assessment payments are paid to injured workers who have exhausted all paid personal leave and have submitted his or her invalidity retirement request to ComSuper, but are awaiting a decision from ComSuper. These payments, whether paid by way of lump sum or paid periodically, are assessed under the compensation rules.

Act reference: SSAct section 17 2 Compensation. An income stream paid to a trust e. It is assessed under the Trusts and Companies rules 4. Note: This assessment will not change if the superannuation fund or product provider pays the income stream payments directly to the income support recipient because the trust still retains ownership of the income stream.

Example: John purchased a life expectancy income stream with a term of 17 years. John died 2 years after the commencement of the income stream. He did not specify a reversionary beneficiary, so it was paid to his estate. Through John's will, a testamentary trust was established and this trust continued to receive the payments from the income stream.

The income stream payments became the property of the trust and were then paid from the trust to John's surviving partner, Beryl. For social security purposes, the income received by Beryl is not an income stream for social security purposes.

This is because the payments are made as a disbursement from the testamentary trust. As such, the income disbursements from the trust become an asset of the trust and, upon disbursement to Beryl, will be assessed under the Trust and Company rules. Where an income support recipient was previously receiving income from an income stream through an entity or some other structure and the ownership structure changes so that the income support recipient now owns the income stream and starts to receive the income payments directly, the income support recipient will be assessed as commencing a new income stream from the date the ownership changed.

In effect, the income stream will be treated as if there was a commutation into a new income stream from the date of the ownership change. The income stream will be assessed as having a commencement day on the date of the ownership change. The income stream provider will need to advise Services Australia Centrelink of a new purchase price equal to the present value of the income stream on the new commencement day 4.

The relevant number 1. Note: Where the life office pays the income stream payments directly to the income support recipient, but the trust still retains ownership of the income stream, the income payments will be assessed as being income from the trust.

Example: On 1 January the Gambler Family Trust purchased a lifetime annuity from a life office on behalf of Greg when he retired at age 65 years. This is treated by Services Australia Centrelink as a commutation to a new income stream, with a commencement day of 1 January The rules are complex and not complying can be costly.

This could include a mix of:. All three of these asset categories can be transferred to support a TTR pension, but they must be chosen in the order outlined above. The tax-free and taxable components of any assets used must also be identified so that appropriate tax payments can be made. The components must be applied proportionally.

You need to keep records that show:. Failure to do any of these things can mean your fund becomes non-compliant, and you know what that means. Transition-to-retirement pensions have real benefits for some people but may be less attractive for others. Deciding whether a TTR strategy is appropriate for you is an important decision and will depend on your personal financial circumstances and goals.

As the information in this article is general in nature, and the calculations around TTR pensions can be complex, we suggest you seek independent financial advice before you act.

You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement PDS or seek personal financial advice before making any investment decisions.

Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more. Your email address will not be published.

Save my name, email, and website in this browser for the next time I comment. All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. Learn more about SuperGuide. Reading time: 6 minutes On this page Am I eligible? What are the advantages? Give me an example What are the drawbacks? How do I get started? How do I stop a TTR pension? What else do SMSFs need to know? Look for advice before you leap.

Learn more about preparing for retirement in the following SuperGuide articles:. Timing counts if you plan to retire this year and start a super pension July 20, How do I apply for the Age Pension? July 20, If the super standards are not met in an income year both of the following apply:. If your fund has failed to meet the pension standards because the trustee has not paid the minimum annual pension payment amount, there are limited circumstances where the Commissioner may accept that the pension did not cease.

SMSFs: Minimum pension payment requirements — frequently asked questions. A member who hasn't met a condition of release with nil cashing restriction and who only has restricted non-preserved benefits or preserved benefits can only fully commute their TRIS and either:.

When the commutation lump sum is returned to accumulation in the SMSF, the tax-free and taxable components will need to be recalculated whenever a new benefit is paid from the fund. A TRIS ceases as soon as a member in receipt of the pension dies, unless a dependant beneficiary is automatically entitled under the SMSF's trust deed or the rules of the pension, to receive the pension upon the member's death.

This is known as a reversionary pension sometimes referred to as a reversionary income stream.