Tony Negline, superannuation and financial services leader for CA ANZ, said in the latest SMSF Adviser podcast that unless there is a period of deflation in the next nine months, the TBC is expected to rise to $2 million.
He said if this eventuates, there’s a wide range of issues that SMSF advisers and trustees will need to think about including the timing of starting pension phase and contribution strategies.
The general transfer balance cap is the cap that determines how much an individual can transfer to retirement phase. On 1 July 2023, it increased for the second time to $1.9 million from $1.7 million.
“This is a bit of a rerun of what happened a couple of years ago when the TBC went from $1.7 million to $1.9 million, and now to $2 million unless inflation is much higher over the next nine months, which could see it rise to $2.1 million,” Negline said.
“I think anyone who’s in pension phase, or close to these limits, or even if they are not in pension phase, they need to decide how important that $2 million threshold is, and whether or not they want to try to access it, in which case they need to decide if they should be commuting pensions or commencing pensions.”
Additionally, he said questions could be asked about whether people should delay starting their pension phase to increase the size of their balance.
“Not only that, but also anyone who’s already maxed out from their transfer balance cap perspective, they’re obviously going to, or have had money, in a pension and aren’t going to move it,” he said.
“They’re getting proportional indexation, and what is that going to look like for them? How much may be opened up for them if they’re in that position?” he continued.
“Anyone who’s near their total super balance or the general transfer balance cap of $2 million, may be able to make non-concessional contributions, but there are limits, and those limits will change.”
If the cap does rise to $2 million in 2025, people who’ve used all their cap before won’t get any increase and those who’ve used just some of their cap before will get a partial increase.
Negline said the prospect of an increase in the TBC means there is more for advisers to talk about with their clients to plan for the eventuality and to understand the impact of pension refreshes on any indexation of the client’s personal cap.
