SMSF practitioners should not be performing calculations for the indexation of the transfer balance cap (TBC) for all their clients and any claims they should be doing so is a myth, according to an SMSF technical manager.
Heffron head of SMSF technical and education service Lyn Formica said there was no need for calculations to be run for all clients in regarding to the indexation of the TBC, effective from 30 June 2021, as in many cases it would be irrelevant.
“There will be clients who will never get anywhere near their TBC and there is no need to calculate that figure, and it does not matter if the indexed TBC will be $1.6 million, $1.7 million or somewhere in between,” Formica said today during a webinar presented by BGL.
“You may have a client who is single, 78 years old, with $800,000 counted towards their transfer balance account (TBA), who does not have a home to sell so can’t make downsizer contributions, and is too old to make other types of contributions and unlikely to inherit superannuation, so for them a revised TBC is completely irrelevant.
“I could do the calculation and work out the indexed TBC is $1.65 million, but I don’t need to because it has no relevance.
“Even where you may have a husband and wife with $500,000 each which is being counted towards their TBA, and presumably when one passes away the intention is to pass the money to the surviving spouse, the combination of those monies will not take the survivor over their TBC, so I don’t need to look at it.”
She added SMSF practitioners should be focusing on clients who were more active in regards to current and future money going into the SMSF.
“Where I should be looking is at those clients who are still contributing or are likely to contribute in the future through things such as downsizer contributions and capital gains tax cap monies,” she said.
“They will want to know how close they are to their cap and what the cap is.
“Even when making a contribution they may be curious to know if they make it, how much of it will they be able to get to pension phase.”
