An SMSF technical specialist has noted the impending indexation of the general transfer balance cap (TBC), taking it from $1.7 million to $1.9 million on 1 July, in dictating whether or not to delay the commencement of a retirement income stream is most relevant for individuals looking to implement their initial pension account within a super fund.
“One of the critical factors in waiting until the new income year to commence an income stream is whether or not the individual has had a transfer balance account prior to 1 July 2023 or if they are in a position where they’re about to start or thinking about starting their first retirement-phase pension,” Accurium head of education Mark Ellem told selfmanagedsuper.
Ellem pointed out the benefit for SMSF members of waiting until the 2024 income year to establish a pension for the first time is to have the ability to enjoy an additional $200,000 with regard to their personal transfer balance cap.
Further, he suggested superannuants should not ignore the part a person’s accumulation account plays in this decision-making process.
“Of course, that’s only going to affect people who have between $1.7 million and $1.9 million sitting in their accumulation account. If the amount in this phase of their SMSF is under this band, it doesn’t matter because they’d be thinking ‘I don’t need my personal transfer balance cap to be higher’,” he said.
“That could be because later on when the general transfer balance cap gets indexed again, and who knows when that is going to be, they might be entitled to a further increase in their own personal transfer balance cap.”
According to Ellem, individuals must also weigh up the advantages current-year exempt current pension income will bring them.
For instance, delaying the commencement of a pension until after 1 July 2023, that could be started immediately, will mean the SMSF will continue to incur a 15 per cent tax on the income of those assets earmarked to support the pension in the future, he said.
As such, the member will have to assess the benefit of enjoying exempt current pension income immediately versus the advantage of being able to include an additional $200,000 in their personal transfer balance cap, he advised.
This subject will be covered in more extensive detail at SMSF Professionals Day 2023. To register for the event, please visit https://web.cvent.com/event/e52ab0af-a2d3-46ef-bd98-4c91b6509c7a/summary?RefId=Summary .
