Changes to the contribution caps and the transfer balance cap (TBC) due to indexation later this year have overshadowed other indexation changes SMSF advisers should keep in mind alongside less commonly addressed caps that will remain at their current levels, according to an SMSF legal expert.
DBA Lawyers special counsel Bryce Figot said while the general TBC will increase to $1.7 million, concessional contributions will rise to $27,500 a year and non-concessional contributions will increase to $110,000 a year, there were some “boring” annual rises that should not be forgotten.
“The low-rate cap amount, the capital gains tax (CGT) cap amount and untaxed plan cap amount will also be indexed, but these are less exciting because they get indexed every year,” Figot said during a recent DBA webinar.
According to the ATO, the low-rate cap will increase from $210,000 to $215,000, and the CGT cap and untaxed plan cap will both rise from $1.515 million to $1.565 million for the 2021 financial year.
Figot said these annual cap increases were in contrast to caps that will not change this year, even though it would appear they should do so.
“Either by design or oversight there are some things we might expect to be subject to indexation and are not subject to it, but are hardwired into the legislation,” he said.
“The ability to use segregation still hinges on $1.6 million and is not defined with respect to the general TBC. With more than $1.6 million in super, as a general rule, you are not allowed to use segregation.
“I think that is an oversight and am not sure if it will be fixed by 1 July, and if I had to bet on it, I don’t think it will happen by that date.”
The ability for individuals aged 65 to 74 with TSBs below $300,000 to make contributions for 12 months from the end of the financial year in which they last met the work test would remain at $300,000, he noted.
“It may be changed to $330,000 in due course, but I would not be holding my breath as I don’t see that happening for the time being,” he said.
He noted the CGT small business concession, which allows a $500,000 retirement exemption, would also remain unchanged.
