Changes from 1 July 2021 will impact how much money you can contribute to superannuation and how much you can have in your retirement phase superannuation account.
In general, your superannuation is either in an accumulation account (when you are building your super), a retirement account (when you meet preservation age and certain conditions of release and can withdraw your super), or in between when you are transitioning to retirement (when you reach perseveration age, are working reduced hours and take some of your superannuation as a pension).
The amount of money you can transfer from your accumulation account into your tax-free retirement account is limited by a transfer balance cap (TBC). From 1 July 2021, the current $1.6m general TBC will be indexed to $1.7m and once indexed, no single cap will apply to all individuals (each person will have an individual TBC between $1.6m and $1.7m).
Indexation will also change other superannuation caps and limits including:
- Non-concessional contributions (contributions from after tax income)
- Concessional contributions (contributions from before tax income such as super guarantee, salary sacrificed super amounts, or contributions you make and claim a tax deduction for etc.)
- Co-contributions (personal contributions made by low and middle income earners matched by the Government up to $500), and
- Contributions you make on behalf of your spouse that are eligible for a tax-offset.
If you are building your superannuation (accumulation phase), indexation of the TBC is a good thing because from 1 July 2021 you will be able to access more of your superannuation tax-free. If you start taking your superannuation after 1 July 2021, your transfer balance cap will be $1.7m.
If you started taking your superannuation before 1 July 2021 and have already had a credit added to your transfer balance account, then your TBC will be between $1.6m and $1.7m depending on the balance of your transfer balance account between 1 July 2017 and 30 June 2021. If your account reached $1.6m or more at any point during this time, your TBC after
1 July 2017 will remain at $1.6m. If the highest credit ever in your account was between $1 and $1.6m, then your TBC will be proportionally indexed based on the highest ever credit balance your transfer balance account reached.
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