If you’re looking to make additional contributions to your super fund to boost your retirement savings and avoid additional taxes, it pays to know what your total super balance and the transfer balance cap is, and the difference between the two.
The transfer balance cap (TBC) is a limit on the amount of superannuation funds you can transfer and hold in retirement phase to support a pension or annuity over the course of your lifetime. It is capped at $1.6 million from 1 July 2017 and is periodically in $100,000 increments in line with the consumer price index (CPI).
Knowing your TBC is important because if your transfer balance account exceeds the cap limit, you will be liable to pay an excess transfer balance tax.
While the TBC looks at the movement of capital to and from retirement phase, the total superannuation balance (TSB) is a sum of the values of your retirement-phase interests and accumulation-phase interests as at 30 June each year. The TSB has been introduced as a measure to help determine your eligibility for various super measures.
Your TSB comprises of:
The ATO will determine your TSB based on the information it receives from your super funds. You can find out your TSB by logging in to your MyGov account.
Knowing your TSB is important as this figure can affect your eligibility for a range of things – like your ability to make non-concessional or catch-up concessional contributions, receive Government co-contributions, claim offsets, and use the segregated asset method. The impact of your TSB on these are outlined below.
Making non-concessional contributions and accessing to the bring forward arrangement
From 1 July 2017, if on 30 June of the previous financial year your TSB is below $1.6 million you may be eligible to make non-concessional contributions and use the bring forward arrangement. The cap for these contributions based on your TSB can be found in the table below (accurate as at November 2019)
Making catch-up concessional contributions
From July 2018, if your total superannuation balance is less than $500,000 on the previous 30 June, you may be able to accrue unused amounts for use in a later financial year.
The 2019/2020 financial year is the first year that the unused cap amounts can be used. Amounts carried forward will expire after five years if they are not used.
Accessing Government co-contributions
From 1 July 2017 in addition to the existing eligibility requirements (i.e. earning less than the threshold), you will be eligible for the government co-contribution in a financial year of up to $500 if:
Claiming spouse tax offsets
As a result of the introduction of TSB, from 1 July 2017, there have been additional eligibility requirements to meet to be entitled to the spouse tax offset. These are:
Using the segregated asset method
From 1 July 2017, SMSFs and regulated super funds with fewer than five members (small APRA funds), cannot use the segregated asset method to calculate exempt current pension income if at any time in the year, the fund has a retirement phase interest, and all of the following apply:
As you can see, while there are key differences between your TSB and the set TBC, both have implications on how and when you can make additional contributions to your super fund.
Understanding super terms and rules can be difficult, but seeking advice from an expert can simplify the complexities and put things into context within your own personal situation. To learn more about how your TSB and the TBC might impact you, contact The Hopkins Group today.
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