Insights
Transfer balance cap indexation
An individual’s transfer balance cap (‘TBC’) determines the maximum amount they can commit to a retirement phase interest in their super fund, such as an account-based pension, without being subject to penal taxation.
When the TBC concept was introduced with effect from 1 July 2017, it was initially $1,600,000. It was increased by $100,000 as of 1 July 2021 to $1,700,000.
The TBC increases in $100,000 increments (or multiples of $100,000) in line with the Consumer Price Index (‘CPI’).
As a result of a substantial increase in the CPI, the TBC is due to increase on 1 July 2023 by $200,000.
Accordingly, an increase in the TBC is seen as a good thing, as it potentially means an individual can have more of their superannuation interest supporting a tax-free pension.
Individuals who start their first retirement phase income stream (otherwise known as a pension) on or after 1 July 2023 will have a TBC of $1.9 million.
From 1 July 2023, individuals will have a TBC between $1.6 million and $1.9 million.
An individual who already had a transfer balance account and at any time met or exceeded their personal TBC will not be entitled to indexation, and their personal TBC will remain the same.
For example, an individual who started their first retirement phase income stream, an account-based pension, on 1 January 2022 with a value of $1,700,000 at the time of commencement, would have fully utilised their then TBC of $1,700,000.
The right superannuation investment strategy will bring comfort
Are you ready for the new super reforms? The new super rules are complex and penalties are strict, and we highly recommend you begin preparing for the changes ahead. By nancial planning professional and taking a considered approach to your investment strategy, it will allow you to feel comfortable through any downturns while still knowing you’re on your way to reaching your goals.
With market knowledge and experience, your advisor can keep track of your portfolio and make any adjustments as needed. A licensed advisor will always consider the effect of market downturns and plan for them as effectively as possible.
Depending on your circumstances, your advisor may look at a strategy that segments your investment which means income is available from other avenues, so you don’t need to sell down assets in a downturn. This is especially helpful when you are drawing a pension from your super.
At the end of the day, you will need to feel comfortable and Modoras Planners are always ready to explain the strategy that is being developed.
Stay on course
We will never commence an investment strategy you don’t feel comfortable with as it can be detrimental to change course during a period of negative returns. We listen to your concerns and discuss the reasoning for our advice.
And if you do get the confidence wobbles down the track, please seek advice before making decisions that may have a greater impact on your retirement savings than the short-term market movements you might be experiencing.
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With a financial advisor, taking steps to secure your future nest egg can be an easier process. Let a Modoras Financial Planner guide you to a strategy that will meet your goals. Call us on 1300 888 803 for a complimentary consultation.
IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (Number 233209). The information and opinions contained in this presentation is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. Any individual making any investment or borrowing decisions should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to borrow funds or purchase, sell or hold any particular investment. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of, credit contract entered into or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog may change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.
