As part of the 2016 Budget, some changes were introduced to make superannuation fairer and more sustainable.
The transfer balance cap applies to the total amount of superannuation that has been transferred into the retirement phase. It does not matter how many accounts you hold these balances in.
The amount of the cap will start at $1.6 million, and will be indexed periodically in $100,000 increments in line with CPI. The amount of indexation you will be entitled to will be calculated proportionally based on the amount of your available cap space. If, at any time, you meet or exceed your cap, you will not be entitled to indexation.
You will be able to make multiple transfers into the retirement phase as long as you have available cap space.
Each individual with superannuation interests in the retirement phase has a personal transfer balance cap. The cap cannot be shared with any other person. To determine your position with respect to the transfer balance cap, you have a transfer balance account. This tracks the net amounts you have transferred to the retirement phase.
The transfer balance account works in a similar way to a bank account. Amounts you transfer to, or are otherwise entitled to receive, from the retirement phase give rise to a credit (increase) in you transfer balance account. Certain transfers out of the retirement phase give rise to a debit (decrease) in your transfer balance account.
The transfer balance cap will affect you if you are currently receiving a pension or annuity income stream that is close to or in excess of the cap, or start a retirement phase income stream after 1 July 2017.
If you are currently receiving a pension or annuity, you will need to speak to your superannuation providers about the likely value of your income stream as at 30 June 2017. Check how you can reduce the value of your income stream before 1 July 2017 to ensure you do not have an excess.
If you will commence a retirement phase income stream after 1 July 2017, you will need to:
ensure that your account based pensions and annuities do not exceed the $1.6 million transfer balance cap
include income from certain lifetime pensions (usually paid from a defined benefit fund) in your income tax return if you are over 60, and may need to pay more tax
ensure that if you have a mix of pension types, with a total value exceeding $1.6 million, you reduce any account based pensions to reduce the total value of all your pensions below the transfer balance cap.
Although there is now a limit on the amount of assets you can transfer into a tax-free retirement phase account, this does not affect the amount of money that you can have in the accumulation phase of a superannuation fund. Any amount of superannuation you have in your fund above the $1.6 million amount can be retained in the accumulation phase and/or be taken as lump sum payments.
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