TRIS: Why transition to retirement pensions still matter for SMSFs

TRISs (transition to retirement income streams or pensions) are certainly not as useful as they used to be. They took a significant hit back in 2017 when they lost some key tax breaks. But believe it or not they still have a place for those who have turned 60 and want to access super, maximise concessional contributions or get an early start on recontribution strategies. 

Why did the TRIS lose popularity? 

Before 2017, all pensions (including a TRIS) had the same tax breaks – pension payments were tax free after age 60 and they gave the fund itself an exemption on some or all of its investment income (exempt current pension income or ECPI). Even today, pension payments are still tax free. But since 1 July 2017, only retirement phase pensions have given super funds ECPI and that single change made a huge difference to the popularity of a TRIS. As a result, these days many members just leave their super accumulating until they can start a retirement phase pension – either by retiring or turning 65. 

Where can a TRIS still benefit SMSF clients? 

Accessing super from age 60 to support concessional contributions 

At the risk of stating the obvious, a TRIS can still provide valuable access to super at age 60 regardless of retirement status or future work intentions. While some people are using that period of life to boost super savings rather than draw down on them, anyone needing access to cash could do worse than considering a TRIS.

While pension payments are limited to 10% of the balance at the start of the year (assuming they don’t contain any super that isn’t preserved), they’re still a means of accessing income entirely tax free.

Consider these circumstances when a TRIS might be a perfect solution for a super member who has just turned 60. 

Chris – facing a cash flow crunch 

Chris is maximising his salary sacrifice contributions (and fully utilising his concessional contributions cap) but recent interest rate rises have meant his mortgage payments make that impossible. It looks like he’ll have to reduce his salary sacrifice contributions to make ends meet. A TRIS potentially means he doesn’t need to do that – it provides extra cash flow to ensure he can still make highly tax effective salary sacrifice contributions.  

Even better, Chris should do the sums. He might find he’s better off maximising his TRIS pension payments and accelerating the repayment of his mortgage as well as maintaining his salary sacrifice contributions.  

Molly – thinking about her catch up concessional contribution opportunities 

Molly has just realised she is in a superannuation sweet spot. At 30 June 2026 she had $480,000 in super (ie, just under $500,000). In the last 5 years she hasn’t used anywhere near all of her concessional contributions caps. She earns a salary of $150,000 pa (so her compulsory contributions are $18,000.  

If she starts a TRIS “now”, she’s able to withdraw $48,000 from her balance this year. Let’s say that’s enough to “use up” the rest of the concessional contributions cap for 2026/27 ($14,500) and some of the cap she had leftover in 2021/22 – 2025/26.  

The benefit to Molly is she gets a tax deduction for that $48,000 which is worth around $16,410 in terms of a (personal) tax refund for 2026/27. Of course, the money will be taxed when it goes back into the super fund (15% of $48,000 is $7,200) so the ultimate saving for Molly is more like $9,210 ($16,140 less $7,200). 

The net result is she’ll have slightly less in super (tax on her $48,000 concessional contribution of around $7,200) but she has some options here to refine the whole process. She could: 

• contribute some or all of her personal tax refund ($16,410) as a non-concessional contribution. That puts her ahead of where she started – thanks to the tax saving on her extra concessional contributions. 
• contribute some or all of her personal tax refund ($16,410) as a non-concessional contribution. That puts her ahead of where she started – thanks to the tax saving on her extra concessional contributions. 

Again, it will be a matter of doing the sums and making sure she stays below $500,000 for long enough to make the most of her sweet spot. Once she’s done so (or her balance has increased above $500,000), any money leftover from her withdrawals could be recontributed to super as a non-concessional super contribution. This is still valuable – in effect it’s a small recontribution strategy. Which brings me to the next benefit of a TRIS for larger balances.  

Starting a recontribution strategy before retirement 

The period between 60 and 75 is the perfect time to consider a recontribution strategy – it’s possible to both withdraw from and contribute to super. (Read here for an explanation of recontribution strategies : Recontribution strategy: How does it work and who can use them | Heffron.)

These days, those still working between 60 and 65 often underestimate the value of a TRIS in helping to kick start that process.

Vincent (60) - $1.5m super balance 100% taxable component 
If Vincent starts a TRIS, he can withdraw up to $150,000 from his super account in 2026/27. Let’s say Vincent withdraws $130,000 and recontributes the full amount as a non-concessional contribution.

The TRIS gives him four critical benefits here:  

• it allows him to access his super in the first place, 

• it ensures he gets to use his 2026/27 non-concessional contributions cap which would otherwise be lost, 
• it gives him a chance to get started on his recontribution strategy “now” rather than waiting another 5 years. And that has value in itself. Waiting means he’s exposed to the risk of future rule changes or even significant increases in his balance that push him over the thresholds that reduce his non-concessional contributions cap (even to $nil). 
• The existence of the pension means his old “taxable super” is kept separate from his new “tax free component” (the non-concessional contribution). That will make future recontributions even more effective. 

The final point brings us neatly to the other huge benefit of a TRIS. 

Keeping “tax free” and “taxable” components separate

Even though a TRIS doesn’t bring all the same advantages as a retirement phase pension, it still has one key tax benefit applicable to all pensions : it becomes a unique super interest with locked in tax components. 

This is particularly critical for those exploring recontribution strategies over multiple years. It means most or even all of the future withdrawals can come from the original TRIS (which, let’s say, is largely made up of a taxable component).  

Of course, if the new non-concessional contributions are also converted into their own TRIS(s), they will have to make pension payments. So some tax free money might also need to be withdrawn. But certainly the larger withdrawals can be made from the original (taxable) TRIS. 

And of course this doesn’t all have to be perfect. 

Let’s say Vincent (thanks to his TRIS), ends up making withdrawals of around $130,000 each year and recontributing these to his accumulation account. He doesn’t convert this amount to a pension for another 5 years when he turns 65. By that time, his accumulation account has grown to around $725,000, ie $650,000 of non-concessional contributions and another $75,000 in earnings. If he converts this amount to a pension, he will lock in a tax free component of around 90%. It’s not 100% but pretty close! And certainly close enough for him to be far less concerned about leaving that amount in super for his adult children to inherit. 

Jane – looking to maximise non-concessional contributions 

Jane is in a completely different boat. Like Vincent, she has $1.5m in super (all taxable component) but she’s looking to make non-concessional contributions to maximise her super over the next few years. She doesn’t seem an obvious candidate for starting a TRIS – she’s focussed on putting money into super not taking it out. But in fact she can also benefit from a TRIS. 

If she converts her existing $1.5m to a pension, she can – like Vincent – keep this money separate from her future non-concessional contributions. 

What to check before recommending a TRIS 

Remember some interesting features of a TRIS: 

• It will automatically turn into a retirement phase pension at 65. Someone like Jane will need to make sure her pension doesn’t exceed the transfer balance cap at the time of her birthday, 
• The switch isn’t automatic for someone who retires – it depends on when the member tells the trustee they’ve retired. Don’t forget to do that and document it appropriately or the pension will remain a TRIS for longer than necessary, 
• The transfer balance cap doesn’t apply to a TRIS – these pensions can be any size. 

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