Operations of Transfer Balance Cap

From 1 July 2017, the amount of super balance you can transfer from your accumulation account into retirement phase is subject to a limit known as the Transfer Balance Cap.  For the 2017-18 financial year, this limit is set at $1.6 million. Every year after, the cap will be indexed in $100,000 increments.

Your Transfer Balance Cap began on 1 July 2017 if you were already in retirement phase and receiving pension income. Otherwise, it will begin when you commence your retirement phase.

Your Transfer Balance is made up of:

• Any retirement phase income streams before 1 July 2017
• New retirement phase income streams started from 1 July 2017
• The value of other pensions or annuities, for example, a super pension you are receiving or start to receive from a deceased spouse’s super account

You can transfer amounts into the retirement phase up to the available cap space. If you reach or exceed your cap, you will not be entitled to indexation.

In the event you exceed your Transfer Balance Cap, you may have to:

• commute (i.e. convert a portion of your income stream into a lump sum) the excess from one or more retirement income streams
• pay tax on the notional earnings of that excess

If the total amount in your retirement phase account grows over time through investment earnings to more than $1.6 million, you won’t exceed your cap.  If the amount in your pension account goes down over time, you cannot increase it if you have already used all of your cap space.

A change in your transfer balance only occurs when a credit or debit event occurs:

Contributed by Helene Kosasie.