The Treasury Laws Amendment (2017 Measures No 2) Act 2017 makes a range of technical amendments to the super reform legislation. 

TRIS rules for becoming retirement phase pension

The amendments deem a transition-to-retirement income stream (TRIS) to be in retirement phase where the recipient of the income stream has satisfied a condition of release with a nil cashing restriction (eg retirement or attaining age 65). This means that a TRIS will stop being a pension (subject to 15% tax on fund earnings from 1 July 2017) and become a retirement phase superannuation income stream that qualifies for the earnings tax exemption once the recipient notifies the fund that a nil condition of release under the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) has been satisfied.

Except for attaining age 65, the individual will be responsible for notifying the fund of a nil condition of release (such as retirement, permanent incapacity or a terminal medical condition). The fund will be entitled to the earnings tax exemption from the time it is notified.

Under the super reform legislation, a superannuation income stream must be in the "retirement phase" from 1 July 2017 in order for the fund to claim an earnings tax exemption for the assets used to meet pension liabilities. A TRIS is specifically deemed not to be in retirement phase. As such, from 1 July 2017, a fund will not qualify to access the exempt current pension income (ECPI) provisions in relation to TRIS obligations.

The amendments will mean that a recipient of a TRIS will not need to commute and rollover their TRIS benefits to a replacement superannuation income stream to access the earnings tax exemption when the TRIS recipient later satisfies a condition of release with a nil cashing restriction. To avoid individuals having to restructure their TRIS interests to convert them into a retirement phase superannuation income stream, the amendments to s 307-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) will deem a TRIS to enter retirement phase when the recipient notifies the fund that a nil condition of release has been satisfied.

CGT relief for TRIS assets

The period in which an asset supporting a TRIS can cease to be a segregated current pension asset of a fund and still qualify for CGT relief will be extended to include the start of 1 July 2017. This change will ensure that the CGT relief applies as intended to segregated assets that support TRISs prior to the TRIS changes coming into effect. Extending the period to the start of 1 July 2017 seeks to recognise that the change for TRISs will apply from 1 July 2017 without any action being taken by the holder of the TRIS or the entity that provides it.

Pension balance credit for LRBA repayments

The Act provides that an additional pension transfer balance credit will arise for certain repayments of a limited recourse borrowing arrangement (LRBA) by a self-managed superannuation fund (SMSF) that shifts value between an accumulation phase interest to a retirement phase superannuation income stream interest in the fund: new s 294-55 of ITAA 1997. The amount of the credit will be equal to the increase in the value of the retirement phase interest. The credit will arise at the time of the repayment.

The measure is aimed at concerns about the ability of SMSF members to potentially use LRBAs to effectively transfer the growth in fund assets to the retirement phase, which would not currently be captured by the $1.6 million pension cap regime.

It is important to note that if the repayment by the fund is sourced from assets supporting the same retirement phase interest it will not result in a transfer balance credit as the LRBA reduction is naturally offset by a corresponding reduction in cash. However, if the repayment is sourced from other assets (eg assets that support a separate accumulation interest in the fund), there will be no offsetting decrease in the value of the retirement phase superannuation interest, meaning that a transfer balance credit is required for the increase pension interest by the repayment.

To determine whether a transfer balance credit has arisen, trustees will need to identify the source of any payments in respect of an LRBA that is supporting a retirement phase income stream. To the extent that such payments are sourced from other assets, a transfer balance credit will arise. It is not necessary to determine the total value of a particular super interest supporting an income stream in order to calculate the amount of a transfer balance credit for the repayment of a related LRBA. All that is relevant is the amount of the increase in the value of the interest, which can be determined by reference to the amount of the payment that is sourced from assets supporting accumulation phase interests.


Bob is 65 and is the only member of his SMSF. Bob's superannuation interests are valued at $3 million and are based on cash that the SMSF holds.

Bob's SMSF acquires a $1.5 million property. This property is purchased after 1 July 2017 using $500,000 of the SMSF's cash and an additional $1 million that it borrows through an LRBA. Bob then commences an account-based income stream.

The superannuation interest that supports this income stream is backed by the property, the net value of which is $500,000 (being $1.5 million less the $1 million liability under the LRBA). Bob therefore receives a transfer balance credit of $500,000.

Bob's SMSF makes monthly repayments of $10,000. Half of each repayment is made using the rental income generated from the property. The other half of each repayment is made using cash that supports Bob's other accumulation interests. At the time of each repayment, Bob receives a transfer balance credit of $5,000, representing the increase in value of the superannuation interest that supports his income stream. The repayments that are sourced from the rental income that the SMSF receives do not give rise to a transfer balance credit because they do not result in a net increase in the value of the superannuation interest that supports his income stream.

The LRBA integrity measure will only apply prospectively in relation to borrowings entered into on or after 1 July 2017. Importantly, a transitional provision ensures that it will not apply to the re-financing of an existing pre-July 2017 borrowing. However, to qualify for this exemption, the re-financing arrangement must apply to the same asset and the re-financed amount must not be greater than the outstanding balance on the LRBA just before the re-financing.

Pension transfer balance cap

The Act also makes the following changes to the $1.6 million pension transfer balance cap provisions:

  • enables additional transfer balance credits and transfer balance debits to be prescribed by regulation. For example, special credit and debit rules are likely to be required for the new "innovative income stream products" that are currently being developed;
  • clarifies the matters covered by the assumption about compliance with pension or annuity rules and for which the consequences of not complying with a commutation authority are disregarded;
  • enables the correct value for a debit that arises for failures to comply with rules and standards to be calculated for a failure that occurs part-way through an income year;
    provides an alternative debit where the proceeds of structured settlements were contributed into superannuation prior to 1 July 2017;
  • amends the rules for the part-year defined benefit income cap so that they only apply where an individual is first entitled to concessional tax treatment in respect of defined benefit income; and
  • brings forward the application of the rules about the transfer of assets by life insurance companies to facilitate those companies accounting for and rebalancing their assets in anticipation of the transfer balance cap applying from 1 July 2017.