Contributions, Superannuation

Inflation may drive TBC to $1.9m

Inflation TBC

The transfer balance cap may increase rapidly to $1.9 million, driven by the current high inflation, opening up contribution opportunities.

The rapid increase in inflation may drive the transfer balance cap (TBC) up to $1.9 billion within a year, opening up contribution opportunities for SMSF members previously unable to add to their current fund balance, according to an SMSF expert.

Heffron managing director Meg Heffron said the current TBC of $1.7 million was likely to increase to $1.8 million due to the current level of inflation, but the jump may even be higher.

“The TBC goes up with inflation and there’s one thing we all know, inflation is historically high,” Heffron said at the Heffron Super Intensive Day 2022 in Sydney today.

“Would you believe we have already had so much inflation that the cap is definitely going to $1.8 million unless inflation is negative for the next couple of quarters.

“In fact, if inflation is the same next quarter and the quarter after that as it was for the last quarter, we will skip an increase and go straight to $1.9 million.”

She said this increase would be useful for people who have written off contributions into their SMSF because their balance is too high or they are too old.

For SMSF members in pension phase who have fully used their TBC, they could add more funds to their accumulation account and also make use of the removal of the work test and bring-forward rules for people aged up to 75, she noted.

“We are going to have to keep thinking about [clients] right up until age 75 because these opportunities to put money into super will come off and on again, possibly multiple times during that time,” she said.

“We will have to effectively be constantly tracking their TSB (total super balance) against the TBC because that cap will just keep going up and if inflation remains high, it will go up quite fast.”

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