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Retirement, Superannuation

Don’t overlook low-balance TBCs

low transfer balance cap

Low personal transfer balance caps should not be overlooked given the number of measures that allow SMSF members to increase balances well into retirement.

Advisers with SMSF clients who have a low transfer balance cap (TBC) below $1.6 million should not ignore the recent indexation of the general TBC to $1.7 million as a number of superannuation measures could take their personal cap close to or past the new threshold, a technical manager has warned.

Heffron managing director Meg Heffron said the indexation of the general TBC from 1 July 2021, which in turn created a range of personal TBCs between $1.6 million and $1.7 million, was still a factor for SMSF members whose personal TBC was below $1.6 million.

“There are going to be people who will go straight up to $1.7 million and some people will stay on $1.6 million because they used up their cap in 2017,” Heffron said during a presentation at the recent Heffron Super Intensive Day 2021.

“Then there are people for who it may not matter. Their balance is low, far less than $1.6 million, and they have no prospect of getting above that, so they don’t care whether their transfer balance cap is $1.6 million, $1.65 million or $1.7 million.

“I would be really cautious in assuming a client is definitely going to fall into that category.

“A person could have less than $1.6 million but may inherit their partner’s super and will care about the increase in their TBC.

“The removal of the work test may mean that people who you never imagined would keep contributing well into old age do so, selling other assets and moving money into super while downsizer contributions – a large sum at $300,000 – could make a difference.

“There are a whole lot of people we could ignore this issue for, but my counsel is not to assume that will be the case and getting some indexation on a TBC, however small, can be quite useful.”

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