The high level of inflation has meant that the transfer balance cap (TBC) will rise from July 2023.
The Transfer Balance Cap (TBC) is the maximum amount allowed to be used to pay a member a pension. From July 2023, this will rise from $1.7 million to $1.9 million.
This means that members that have not already used all their TBC, will receive an increase to their caps. For those contemplating starting a pension prior to 1 July 2023, they may wish to delay the decision to take advantage of the higher cap, even if they do not wish to use their entire TBC.
Indexation of personal transfer balance caps
Due to the way personal TBCās are calculated, only the unused amount of a member’s highest transfer balance is eligible for indexation. Delaying the use of the TBC allows a greater indexing amount to be applied, as illustrated below.
TBC used between 1 July 2021 and 1 July 2023 | Personal TBC after 1 July 2023 |
$1.7 million | $1.7 million |
$1.5 million | $1.722 million |
$1.0 million | $1.782 million |
$0.5 million | $1.840 million |
Zero | $1.9 million |
More opportunities to put savings into SMSF
This change will also allow members with total superannuation balances above $1.7 million, but below $1.9 million on 30 June 2023 to make further non-concessional (after tax) contributions.
This combined with the recent changes allowing voluntary contributions for people aged between 67 and 75 (without having to meet working requirements), opens more opportunities to tip more into super for those with spare savings currently outside of the superannuation system.
How can Walsh Accountants help?
This article is general advice only and may not apply to your personal circumstances. You should always seek advice before acting on any financial information that is not provided for your specific situation.
Should you require advice based on your personal circumstances, please contact our resident SMSF Manager Grant Sloggett.
