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ATO unveils further details on TBC indexation

Sarah Kendell
18 November 2019 — 1 minute read

The ATO has released further details around the forthcoming indexation of the transfer balance cap, which may occur as soon as 1 July next year.

In an announcement posted on the ATO website, the regulator said following indexation, individuals would have their own TBC of between $1.6 million and $1.7 million depending on their circumstances.

“If you start a retirement income stream for the first time after indexation occurs, you will have a personal transfer balance cap of $1.7 million,” the ATO said.

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“If you had a transfer balance account before indexation occurs, your personal transfer balance cap will be $1.6 million if at any time between 1 July 2017 and indexation occurring, the balance of that account was $1.6 million or more, [or] between $1.6 million and $1.7 million in all other cases, based on the highest ever balance of your transfer balance account.”

The regulator also pointed out that indexation of the TBC could have a flow-on effect to individuals’ contribution caps.

“Indexation of the general TBC may also change other caps and limits that apply to you, if you make non-concessional contributions to your super; if you make a non-concessional contribution to your super and may be eligible for a co-contribution; [or] if you make a concessional contribution to super on behalf of your spouse and want to claim a tax offset for that contribution,” the ATO said.

The regulator said it would calculate individuals’ entitlement to indexation and their personal TBC after indexation based on the information reported to the ATO. 

If an SMSF later reported information to the ATO that affected the highest ever balance of a member’s transfer balance account prior to indexation, the individual’s entitlement to indexation and personal TBC would be recalculated.

The ATO confirmed that indexation of the general TBC would occur on 1 July 2020 if the All Groups CPI figure for the December 2019 quarter was 116.9 or higher. If this was not the case, indexation would most likely occur on 1 July 2021.

Individuals and their tax agent could view the highest ever balance of their transfer balance account and whether their TBC would be proportionally indexed in the ATO’s online services for individuals or online services for agents.

ATO unveils further details on TBC indexation
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