ATO, Superannuation, Tax

TBC indexation may take place in 2020

TBC indexation

The ATO has told trustees the expected indexation of the general TBC could occur as early as mid-2020.

The expected indexation of the general transfer balance cap (TBC) could occur as early as 1 July 2020, the ATO has said.

The regulator announced the indexation of the TBC from $1.6 million to $1.7 million could occur in mid-2020 if the All Groups Consumer Price Index figure for the December quarter 2019 was 116.9 or higher.

“If indexation does not occur on 1 July 2020, we anticipate it will occur on 1 July 2021,” it added.

In an update on its website, it reminded trustees there would be no single cap applying to all individuals once the TBC was indexed to $1.7 million.

“Every individual will have their own personal TBC, somewhere between $1.6 and $1.7 million, depending on their circumstances,” it said.

“If you start a retirement-phase income stream for the first time after indexation occurs, you will have a personal TBC of $1.7 million.”

It pointed out those who had a transfer balance account before indexation occurred would find their personal TBC would be $1.6 million if, at any time between 1 July 2017 and indexation occurring, the balance of that account was $1.6 million or more.

The personal TBC for all other individuals with a transfer balance account before indexation occurred would be between $1.6 million and $1.7 million, based on the highest-ever balance of their transfer balance account, it noted.

“Indexation of the general TBC may also change other caps and limits that apply to you if you make non-concessional contributions to your super, make a non-concessional contribution to your super and may be eligible for a co-contribution, or make a concessional contribution to super on behalf of your spouse and want to claim a tax offset for that contribution.” it said.

At in industry event in August, ATO superannuation and employer relations deputy commissioner James O’Halloran said the regulator was looking ahead in preparation for the first round of indexation that would be applied to the TBC and recommended trustees be aware of the situation.

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