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The transfer balance cap – changes from 1 July

The transfer balance cap is essentially a limit on how much superannuation a member can transfer from the accumulation phase over into the tax free pension phase. Whilst the transfer balance cap will be indexed to CPI, it will only go up in $100,000 steps.

On 1 July 2021, the general transfer balance cap has in fact been indexed, and will go up from $1.6 to $1.7 million.

Now unfortunately (as with many things super related) there is some complexity around this, as this new cap will NOT apply to everyone.

In a nutshell, a SMSF member will find themselves in either one of two camps:

  1. If a member starts a retirement income stream on or after 1 July 2021 FOR THE FIRST TIME, then the member’s personal transfer balance cap will indeed be this new indexed limit of $1.7 million.

    or

  2. If a member had a transfer balance account PRIOR TO 1 July 2021, then their personal transfer balance cap will be:
    – $1.6 million, if their account balance was $1.6 million or more at any time between 1 July 2017 and 30 June 2021, or
    – for all other cases, it will be between $1.6 million and $1.7 million, based on the highest ever balance of their transfer balance account.

The ATO state that from July 2021, personal transfer balance caps will be able to be viewed at ATO online, and that it will be the only place that a personal transfer balance cap will be able to viewed if you had a transfer balance account prior to 1 July 2021.

As per usual with this sort of thing, seek professional advice prior to implementing any strategies involving complexity and cap levels.

 

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