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Phone 02 8383 4400

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SMSF - $1.6 MILLION TRANSFER BALANCE CAP

In recent years the Australian Government has made significant changes to Australia’s superannuation rules and regulations making it vital that SMSFs and individuals remain alert and updated to avoid potential taxation breaches when managing their accounts. The transfer balance cap is a recent change that may affect you right now.

When you enter the ‘retirement phase’, a transfer balance account is automatically created for you at the commencement of this phase. Your transfer balance account will be used to track how much you use of your transfer balance cap and to ensure that the total amount you transfer from your ‘accumulation phase’ in to your tax-free ‘retirement phase’ accurately reflects the cap.

The Australian Taxation Office (ATO) can inform you of your transfer balance account details at the time of commencing your ‘retirement phase’, enabling you to determine the effect the transfer balance cap has on your personal superannuation circumstances.

As at 30 June 2017 and from 1 July 2017 the total value of your superannuation interests that support your superannuation income streams count towards your transfer balance cap.

Should your transfer balance exceed your cap, the Commissioner of Taxation will order a reduction be made of your retirement phase superannuation interests by the excess amount. Such a mandatory reduction is intended to rectify any breach of your transfer balance cap.

In addition, should you breach your transfer balance cap, you may be liable to pay tax on any excess transfer balance earnings. In the 2017-18 financial year, you can expect a single penalty tax rate, however subsequent breaches from the 2018-19 financial year will incur increases to the penalty tax rate.

It should be noted that the transfer balance cap will be indexed periodically with the rate of inflation in $100,000 increments.

Furthermore, the transfer balance cap applies to an individual, so couples will need to consider their superannuation in light of the new limit.

Our YML Super Solutions Team can help you determine how to manage your SMSF with respect to the transfer balance cap. Whether you’re an individual, a couple or a holder of a Transition-to-Retirement Pension (TRIP) account, we can advise you of your future options to maximise your superannuation throughout your ‘retirement phase’.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your superannuation transfer balance cap. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.