Natalie Scott, superannuation adviser for Accurium, said in a recent online webinar that some clients may be impacted by the rise in the general TBC to $2 million.
“The clients this might apply to include someone who’s looking at retiring in the last couple of months of the financial year,” Scott said.
“You may suggest that they hold off on their plans until 1 July 2025 so they can access that extra $100,000. Another example is somebody who has turned 65. If they hold off commencing a pension until 1 July 2025 they will get the $2 million transfer balance cap.”
Scott said it’s important to remember that an individual only has a personal transfer balance once their income stream is in retirement phase.
“An income stream will be in retirement phase when the member has attained age 65 and met the retirement condition of release, or the two less common conditions of release would be a terminal medical condition or permanent incapacity,” she said.
“It’s only once a member starts an income stream in retirement phase that they will have a personal transfer balance cap. You can manage that from the member’s point of view and wait until after 1 July to commence that income stream if they’re in that scenario.”
However, she said, there are some clients who may potentially get trapped if they have already started a transition to retirement income stream (TRIS) that is not in retirement phase.
“They don’t get exempt current pension income deduction. Once you’ve met preservation age, and assuming that your trust deed allows that, you can commence a TRIS that’s not in retirement phase and take out between 4 and 10 per cent of the balance.”
“The tricky thing here is once that person meets a condition of release, and that’s usually going to be retirement or attaining age 65, that choice will automatically convert to a TRIS in retirement phase.
“[If this is case] you’re going to automatically have them have a personal transfer balance cap account, unless you turn that pension off before their 65th birthday.
“If they won’t have a personal transfer balance cap, you can just have them recommence the pension from 1 July, and they’ll get that $100,000 increase.”
Scott said the same process would apply for clients in retirement phase as well, but in that case, you are more likely to be aware of the client meeting the retirement definition, as documentation is required.
