TBC simplification possible in budget

TBC simplification budget

The confusion around the indexation of the transfer balance cap may lead to a more simplified model but the government has given nothing away so far.

The recent indexation changes to the transfer balance cap (TBC) may still be subject to change, with some parts of the industry calling for simplification of thresholds in this year’s budget, according to a technical expert.

BT head of financial literacy and advocacy Bryan Ashenden said while the general TBC has been slated to change from 1 July 2021, suggestions about simplifying the change have been made due to the complications that would arise from the development of individualised TBCs.

“Some of those suggestions are to not index the TBC and to leave it at $1.6 million for everybody and this is the figure we set it at,” Ashenden said at a BT Academy Technical Webinar on possible federal budget outcomes yesterday.

“Another option is it could be set at the $1.7 million for everybody and it does not matter when you started and at how much, everybody just gets that value of the extra $100,000 of indexation coming through.”

He said a third option was a ‘you get what we get’ arrangement where if someone starts drawing an income stream when the general TBC is $1.6 million, then it remains set at that level and if the income stream was started when the TBC was $1.7 million, that threshold would apply.

“Under this approach there is no individualised indexation and you get whatever the limit happens to be for the financial year when you first have an amount assessed to your transfer balance cap,” he said.

He noted calls for a simplification of various contribution thresholds related to superannuation may play a part in determining an outcome, but added the government has given no indication of any plans to date.

“All of those ideas have their benefits and they all have their negative sides and are options that have been put to the government,” he said.

“Of course, the other option is we stick with the legislation as it is with the current indexation and the current proportional indexation coming through.”

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