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CHANGES IN TRANSFER BALANCE CAP FOR PENSION PHASE ACCOUNTS FROM 1 JULY 2017

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24
May

On 27 September 2016, the Australian government recently released the second tranche of proposed superannuation changes of the balance cap for pension transfer. As per the proposal from 1 July 2017, the general transfer balance cap will be $1.6 million.

This balance cap policy forms on the Coalition’s 2016 /2017 Federal Budget announcement. The main function of this policy is to limit the total amount of superannuation savings that can be transferred from accumulation phase into a tax-free retirement account. If you do not have a pension account, you can transfer a maximum of $1.6 million from your accumulation accounts into the pension phase under this legislation. After July 2017, most of the retirees have to monitor two lifetime superannuation amounts. One is their transfer balance cap, and another is their transfer balance account. This policy will be applicable for both existing and new super pension accounts from 1 July 2017.

This superannuation cap will be indexed in $100,000 increments, in line with increases in the consumer price index. If an individual exceeds their transfer balance cap, he/she will be liable for excess transfer balance tax. Their excess transfer balance and the tax rate on excess transfer balance earnings increases for second and subsequent breaches occurring in the 2018-19 financial year. A special tax at the rate of 15% will apply on the national earnings of the excess portion of the pension. It is important to understand the rules and plan well to avoid the penalty before next financial year.


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