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Opportunity for SMSF trustees with new ruling

In the weeks before Christmas, the Australian Taxation Office (ATO) issued a private binding ruling (PBR) which has opened the door for a new strategy for individuals aged between 55 and 59 to potentially receive their transition to retirement income stream (TRIS) payments tax-free.

The strategy involves utilising the “low rate cap” which allows an individual to withdraw up to $195,000 (limit for the 2016 financial year) of their taxable component of their superannuation benefit tax-free.  This was previously thought to be only available when there were unrestricted benefits which could be taken as a lump sum but the recent PBR indicates that individuals can elect to have preserved amounts withdrawn via a TRIS treated this way.

This strategy is potentially beneficial for anybody aged between their preservation age and 59 who is currently receiving a TRIS or can commence one.  However, it is important to note that any payments made using this strategy must not exceed the 10% maximum payment limit for their TRIS and it is crucial that a written election must be made BEFORE the payment is made in order for it to be treated as a lump sum for tax purposes.

In conclusion, this strategy seems very like “having your cake and eating it too” which raises the concern that the ATO may move quickly to shut the door on it.  It must also be noted that a PBR is only binding on the ATO for the specific taxpayer it was received for so it may be advisable for anyone wishing to implement this strategy to obtain their own PBR to be on the safe side.

An individual’s personal circumstances must be taken into account when deciding if this strategy is applicable.  Please speak with your usual Hanrick Curran adviser to schedule a time to discuss if this strategy could benefit you, or contact our Superannuation partner, Clive Todd on 07 3218 3900.


Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.