Proportional indexation of transfer balance caps from 1 July 2023
About the super balance cap
From 1 July 2017, the total amount of super you can transfer into a tax-free retirement account is capped. This is called the transfer balance cap.The general transfer balance cap began on 1 July 2017. This is a lifetime limit on the total amount of super that can be transferred into tax-free retirement phase income streams, including most pensions and annuities.
If you have amounts in retirement phase, then you will have a transfer balance account.
All retirement phase income streams and retirement phase death benefit income streams you receive count towards your transfer balance cap.The age pension (or other types of government payments) and pensions received from foreign super funds don't count towards your transfer balance cap.
Indexation of the transfer balance cap
The general transfer balance cap is reviewed each financial year. Indexation occurs in line with the consumer price index in $100,000 increments. The first tranche of indexation of the general transfer balance cap occurred on 1 July 2021, increasing to $1.7 million. Before 1 July 2021, all individuals with a transfer balance account had a personal transfer balance cap of $1.6 million.
On 1 July 2023, the general transfer balance cap will index by $200,000 to $1.9 million.
Individuals now have their own personal transfer balance cap, depending on their circumstances cap, between $1.6 and $1.9 million, based on the highest ever balance of their transfer balance account between 1 July 2017 and 30 June 2023.Your cap:will be equal to the general transfer balance cap that applied when you started your first retirement phase income stream, and may be increased by proportional indexation depending on the highest ever balance you have held in retirement phase. If you have no cap space or an excess transfer balance, you are not entitled to indexation of your transfer balance cap. You can view your personal transfer balance cap in ATO online services, through myGov.
While indexation will occur on 1 July 2023, the ATO won't be displaying member’s updated personal transfer balance caps until 11 July 2023. The ATO encourages all SMSFs to report any events that occurred prior to 1 July 2023 by 30 June 2023, to ensure member’s personal transfer balance cap calculations are based on correct and up to date information.
From 11 July, both members and their agents will be able to view the member’s personal transfer balance cap on the ATO’s website. After 11 July 2023, a member's personal transfer balance cap will be recalculated if the ATO receives reporting of events effective prior to 1 July 2023.
Individuals can continue to report transfer balance cap information to the ATO between 1 July 2023 and 11 July 2023, however these will not be processed until after this period. This means the ATO won't be able to issue or revoke excess transfer balance determinations it has sent to a member, or commutation authorities it has sent to a fund. Processing of any reported events will continue as normal after 11 July 2023.
For more information on super income streams, see:
Indexation of the general transfer balance cap
Capped defined benefit income streams
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IMPORTANT: This communication is factual only and does not constitute financial advice. Please consult a licensed financial planner for advice tailored to your financial circumstances. Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Source includes ATO QC 50880 last modified 1 Jun 2023. Liability Limited by a scheme approved under Professional Standards Legislation.
