Implications for pension planning with likely TBC increase
With the current rates of inflation likely to see another increase in the general transfer balance cap and contribution caps, certain strategies may be impacted, advisers have been told.
Speaking in a recent podcast, BT head of financial literacy and advocacy Bryan Ashenden said that given the current rates of inflation, it's almost a certainty that the general transfer balance cap and total superannuation balance will be increased on 1 July 2023.
Mr Ashenden said there may also be another increase in the contributions caps from 1 July next year as well.
A potential increase in the transfer balance cap and contribution caps may have implications for client strategies in the 2022–23 financial year, he said.
“Whilst [these potential increases] shouldn’t stop clients from contributing where they have the opportunity to do so, it is something to consider, especially in terms of bring-forward strategies,” he stated.
Advisers should also consider the likely increase in the TBC where clients are thinking about starting a pension, he said.
“If during the next 12 months clients are considering retiring and drawing on their superannuation and they have balances that are close to or exceed the transfer balance cap, then we should think about whether delaying the commencement of an income stream until the following financial year will allow them to maximise any benefits in the indexation of the transfer balance cap,” he explained.
“Now, of course, this has to be weighed up against the ability to move super into the tax free retirement phase earlier, but it is important to consider the different options that are available.”
Speaking earlier this year, CFS head of technical services Craig Day also predicts the transfer balance cap will be indexed to $1.8 million for the 2023–24 financial year.
“It seems that we may get the second round of indexation in only two years,” he said in late January.
In order for the general transfer balance cap to be indexed, the All Groups CPI figure for the December 2022 quarter will need to be at least 123.7, said Mr Day.
The All Groups CPI figure for the March 2022 quarter was 123.9.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
