The Federal Government is pushing for reversionary transition to retirement income streams (TRIS) to be paid to an eligible dependent upon a death, regardless if a condition of release is met.
Minister for Revenue and Financial Services Kelly O'Dwyer says automatically reverting TRIS in all cases will have benefits for superannuation funds.
"It will also make it easier for superannuation members by eliminating the need for recently bereaved dependants to quickly engage with the super affairs at what is a particularly difficult time," she said.
A reversionary beneficiary is defined as someone who receives a benefit from a superannuation income stream that continues to be paid after the death of the primary beneficiary.
Under the current law, a reversionary TRIS is not transferrable if a dependant has not satisfied a condition of release. Removing this requirement will better align a reversionary TRIS with other reversionary income stream products, reducing administrative complexity and confusion, O'Dwyer added.
According to the draft legislation, the change will allow the original TRIS to be paid to the dependant beneficiary and no longer have to be commuted; a new income stream will also begin from the deceased member's underlying superannuation interests.
"This approach is consistent with the treatment of other superannuation income streams, which do not require the reversionary beneficiary to satisfy a condition of release," it said.
Rainmaker technical services manager Chris Chow says what was once a cornerstone of tax minimisation strategies for wealthy baby boomers, the changes to the concessional tax treatment of a TRIS has significantly changed the financial advice landscape.
"The changes occurred as the Government took the view that TRIS were intended to be used to assist with the transition into retirement by supplementing income as a result of working fewer hours," Chow said.
"However, due to the significant tax concessions, the reality was that they were used purely to minimise tax without a reduction in working hours. As a result, these concessions have been tightened to rein in their use as a tax minimisation tool," he said.
The proposals are part of the Government's superannuation taxation reform package announced in last year's Budget. Submissions are open until February 23.