High levels of inflation will cause the transfer balance cap (TBC) to increase from $1.7 million to $1.9 million from 1 July 2023.
Transfer Balance Cap set to rise to $1.9million
High levels of inflation will cause the transfer balance cap (TBC) to increase from $1.7 million to $1.9 million from 1 July 2023. This will open up new planning opportunities for SMSF members who are close to reaching, or have already reached the current limit of $1.7 million. For example, clients considering the commencement of their first retirement phase income stream, may be better off deferring until 1 July 2023 to lock in the maximum increase to their personal TBC.
Importantly, as the value of the TBC is used when applying the Total Superannuation Balance (TSB) test for various other superannuation measures, several TSB thresholds will also increase from 1 July 2023.
Among the more prominent of those measures is the TSB test that applies to an individual’s ability to make Non-Concessional Contributions (NCCs). While the Concessional and NCC caps will not directly change as a result of this increase to the General TBC, there will be flow on impacts for those individuals seeking to make NCCs from 1 July 2023 onwards.
That’s because an individual’s ability to bring-forward 2 years’ worth of NCCs, enabling a NCC of up to $330,000 in one year, is reliant on their TSB currently being less than $1.48 Million (measured on 30 June of the previous financial year).
Once an individual’s TSB exceeds this threshold, their ability to make bring-forward NCCs is diminished. So much so, that an individual’s NCC cap currently reduces to Nil where their TSB exceeds $1.7 Million.
As a result of the increase to the General TBC, these thresholds are also expected to increase from 1 July 2023.
While it’s not possible to precisely determine these figures at this stage, based on the current NCC cap remaining $110,000, these thresholds are expected to be:
|
Maximum NCC cap |
Current |
From 1 July 2023 |
|
$330,000 |
< $1.48 Million |
< $1.68 Million |
|
$220,000 |
$1.48 – $1.59 Million |
$1.68 - $1.79 Million |
|
$110,000 |
$1.59 – $1.7 Million |
$1.79 - $1.9 Million |
|
NIL |
> $1.7 Million |
> $1.9 Million |
Needless to say, this too will result in further complexity being added to the strategic decision-making for individuals contemplating NCCs.
In some cases, where feasible to do so, deferring contributions until after 1 July 2023 may mean making larger contributions is possible. While for some, who are currently locked out of making contributions due to their TSB, the ability to make NCCs may become a reality once more, with the increasing of the cut-off threshold.
