A senior superannuation executive has reminded practitioners as to how the general transfer balance cap (TBC) is applied when an individual initially satisfies a condition of release, such as turning 65.
“Now remember for the transfer balance cap, you get the general transfer balance cap when you first become entitled to receive a retirement-phase income stream,” Colonial First State head of technical services Craig Day told delegates at the SMSF Association National Conference 2025 held in Melbourne recently.
Day emphasised they should be mindful of this fact in the lead-up to 1 July 2025 when the general TBC is due to increase from $1.9 million to $2 million.
“So if [the client turns] 65 on 24 June, that’s when they first became entitled to receive a retirement-phase income stream … they [are entitled to a TBC] of $1.9 million; they don’t get [a TBC] of $2 million,” he noted.
According to Day, advisers and accountants with clients who have a transition-to-retirement income stream of over $1.9 million and turn 65 just before 1 July 2025 will have to be very careful of this situation.
He used a scenario where a client has a transition-to-retirement income stream of $2 million and turns 65 in June to illustrate what needs to be considered if the individual wants to convert it into a retirement-phase pension.
To this end, he warned if the client converted the transition-to-retirement income stream into a retirement-phase pension on the day they turned 65, a TBC of $1.9 million would apply, meaning an excess of $100,000 would result.
“If they just rolled back [the transition-to-retirement income stream] to their accumulation account a week before and waited until 1 July 2025, what transfer balance cap do they get? Two million dollars,” he explained.
