STRATEGY
Indexation – winners and losers
The application of indexation to several superannuation thresholds will take effect in the new financial year. Tim Miller examines the associated complexity and identifies who the beneficiaries will be from the move.
TIM MILLER is education manager at SuperGuardian.
46 selfmanagedsuper
From 1 July 2021, the general transfer balance cap will be indexed to $1.7 million, which is great news for any individual who hasn’t started to receive a retirement-phase income stream prior to that date. Similarly, the concessional contribution cap will be indexed from $25,000 to $27,500, which in turn means the non-concessional cap gets a boost from $100,000 to $110,000 as well, and this has given us plenty of contribution strategy food for thought. However, not everyone should get excited because while change brings opportunity, it comes with a requirement to understand what that change means for everyone, and in this instance it’s different for everyone. The positives of the higher transfer balance cap are clearly there for those still in accumulation
phase with less than $1.7 million. You can put more into retirement phase and ultimately you can put more contributions into a fund. Similarly, those in a transition-to-retirement income stream (TRIS) who are yet to trigger a condition of release to move them to retirement phase will also be satisfied as they may need to commute less of their TRIS when they do trigger a condition. Of course, there are also benefits for those chasing spouse contribution rebates and government co-contributions. However, for individuals who have already used their full cap, there is little joy, and for those who have used part of their cap, welcome to the world of the indexed personal transfer balance cap.
Indexing the personal cap This is where the fun starts. For those who have already started a pension with $1.6 million, it’s about sitting back and not even bothering to think about further pensions. What they can think about is whether they are eligible to make more contributions because of their total superannuation balance and then whether it is worthwhile putting those extra
