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Superannuation, Tax

Indexation preparation lax

TBC indexation

Nearly two thirds of financial advisers and accountants are yet to determine the effect transfer balance cap indexation will have on their client bases.

A recent survey of financial advisers and accountants has shown almost two thirds of this cohort are yet to review their client base to determine their eligibility for the transfer balance cap (TBC) indexation.

The poll was taken during an Accurium technical webinar with 63 per cent of delegates admitting they were yet to find out how many of their clients could enjoy a higher TBC after indexation was introduced on 1 July this year.

A further 29 per cent of virtual attendees said they were still going through the exercise of identifying which of their clients would enjoy some benefit from indexation, while an additional 8 per cent of advisers said they had completed the process.

Accurium SMSF technical services manager Melanie Dunn noted when practitioners review their client book with regard to TBC indexation they will have to categorise people into one of three groups, the first being individuals who will receive no increase to their TBC from indexation.

“These will be retirees who already have a transfer balance cap and in the period 1 July 2017 and 1 July 2021, have had a highest transfer balance account of at least $1.6 million, the general transfer balance cap. So they’ve used their full cap at some point,” Dunn explained.

She pointed out the ATO estimates around 80,000 superannuants will be in this category.

According to Dunn the second group of clients will comprise people who will receive a full increase in their TBC.

“They will have a personal transfer balance cap of $1.7 million. These will be people who have not yet had a transfer balance account. So they’ve never had a retirement phase income stream post 1 July 2017,” she said.

Dunn identified people who will be eligible to a partial increase in their transfer balance cap as the final group of clients practitioners will be servicing.

“These will be retirees who have had a transfer balance account since 1 July 2017, so people who have started, or who have had, a retirement phase income stream at some point,” she said.

“And they will get an increase [to their] cap in proportion to the maximum amount of their transfer balance cap that they’ve used,” she added.

“What this does mean is that who has commenced a retirement phase income stream since 1 July 2017, or has had a pension, will now potentially have a transfer balance cap that is somewhere in the middle of $1.6 and $1.7 million.”

During the same webinar the majority of practitioners admitted they would not be relying on government data as the source of truth to monitor their clients’ transfer balance accounts after indexation has been implemented.

Indexation will be discussed in greater detail at the SMSFPD Virual 2021 hosted by selfmanagedsuper. To find out more and register please visit https://web.cvent.com/event/1432890d-987b-46a3-970a-5d8043c4258f/summary?RefId=Summary.

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