Advisers will not need to worry about the distinction between the personal and general transfer balance caps (TBC) until these parameters have had indexation provisions applied to them, an SMSF technical expert has said.
Speaking at the selfmanagedsuper SMSF Professionals Day 2017 in Adelaide today, SuperConcepts technical services and education general manager Peter Burgess told delegates: “We’ve done some calculations here and unless we get some spike in the inflation rate over the next few years, we’re unlikely to see any increase in the transfer balance cap until 2020/21.
“When it is indexed it goes up in increments of $100,000, so it will go straight to $1.7 million, but we’re not expecting that $100,000 increment to be reached until 2020/21 and we’ve got quite some time yet before the cap goes up to that level.
“When it is indexed what will happen at that time is any clients that already have a transfer balance account, so they’ve already got a superannuation income stream that’s been assessed against the cap, they will then have a personal transfer balance cap which will be different to the general transfer balance cap.
“So we only have to worry about this when the cap is indexed. Until then their personal transfer balance cap is the same as the general transfer balance cap.”
Burgess pointed out the amount the two caps will differ is dependent on how much of the individual’s TBC had been accounted for due to the proportionate nature of the indexation measure.
He advised delegates this meant if the SMSF member had used 70 per cent of their $1.6 million TBC, they would only be entitled to 30 per cent of the higher balance resulting from indexation.
In reference to the first indexation process, this would be an amount of $30,000 if this were the case.
This would mean the member’s personal TBC would be $1.63 million, while the general TBC would be $1.7 million.
Burgess noted this would only be significant in certain circumstances.
“Why does it matter for a client that has already started their account-based pension and has already been assessed against the cap? They’ve been assessed once and they’re not going to be assessed again in relation to that pension,” he said.
“So for someone who has already been assessed, why do they care about indexation? Well the only time it really becomes relevant is if they’re looking to start a second pension or perhaps going to stop and start their existing pension.
“If clients are not going to do that, then proportionate indexation is of no interest to them.”
