With CPI having increased by 0.9% for the December 2020 quarter, we have seen the CPI figure move to 117.2, above the required figure of 116.9 for indexation to apply in respect to the transfer balance cap.
This means that from 1 July 2021, the general transfer balance cap (‘general cap’) increases from $1.6 million to $1.7 million, and introduces for the first time the complexities of the a member’s personal transfer balance cap (‘personal cap’).
Any indexation of a member’s personal cap will be subject a calculation linked to the smallest amount of available cap space they have had against the $1.6m cap – e.g. if a member has fully utilised the $1.6m within their transfer balance account, then they have 0% space available for indexation, and their personal cap remains at $1.6 million (even though the general cap increases to $1.7m).
With a member’s total superannuation balance (TSB) also linked to the general transfer balance cap, this will also increase to $1.7 million and will impact how a member’s bring-forward period will operate.
It is expected that the concessional contribution (CC) cap will also increase from 1 July 2021 to $27,500, meaning that the non-concessional contribution (NCC) cap will also increase to $110,000.
Combining both of these indexed values will mean the following in respect to allowable NCCs and the bring forward rule:
|Threshold||Allowable NCCs & bring forward|
|$1.70m or more||Not eligible|
|$1.59m to less than $1.70m||$110,000|
|$1.48m to less than $1.59m||$220,000|
|Less than $1.48m||$330,000|
There are a number of important considerations around these transfer balance cap changes, impacting retirement phase income streams, contribution rules and other various other measures. We will be exploring many of these issues throughout our training in the coming months including our upcoming SMSF Virtual Day 2021 on 30 & 31 March 2021.