Good news for everyone looking to grow their superannuation balance. The ATO has announced that from 1 July 2021 the transfer balance cap (TBC) will be indexed from $1.6m to $1.7m.
Some of you may be asking – what is the TBC?
The superannuation system was overhauled so that individuals could only have a maximum of $1.6m in a tax-free retirement or pension account from 1 July 2017. This limit is known as the transfer balance cap. Prior to this there was no limit to how much you could hold in a tax-free retirement account within your superannuation fund, resulting in individuals already holding more than $1.6m in pension phase needing to transfer excess amounts back into accumulation phase to remain compliant.
What does the indexation mean?
This can provide further opportunity for those individuals who have not utilised their full $1.6m cap to make additional contributions to superannuation. Alternatively, those thinking about commencing a retirement phase income stream (RPIS) from 1 July 2021 can look to increase the amount of their superannuation that is held in a tax-free account.
For individuals that have used some but not all of their TBC before 1 July 2021, your personal transfer balance cap will be proportionally indexed based on the highest ever balance of your transfer balance account.
For individuals who have already utilised their full $1.6m TBC they will not be entitled to further indexation.
If you are looking to implement a strategy to increase your superannuation balance or alternatively, you have a strategy that needs updating, please contact our superannuation team, or your relationship partner.
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