Overview
From 1 July 2023, the general transfer balance cap is expected to be indexed to $1.9 million. The personal transfer balance cap for individuals will vary and is dependent upon their circumstances, ranging from $1.6 million and $1.9 million.
This article will cover the following 3 scenarios:
- Commencing a retirement phase income stream for the first time on or after 1 July 2023
- A member who has met/exceeded their personal transfer balance cap prior to 1 July 2023
- A member who has not used the full amount of their personal transfer balance cap prior to 1 July 2023
For further information regarding the indexation, visit the Transfer balance cap indexation article released by the ATO.
Commencing a retirement phase income stream for the first time on or after 1 July 2023
Members starting a retirement phase income stream for the first time on or after 1 July 2023 will have a transfer balance cap of $1.9 million.
Example: A member begins their first retirement phase income stream on 17 July 2023. Their personal transfer balance cap will be $1.9 million.
A member who has met/exceeded their personal transfer balance cap prior to 1 July 2023
If a member has a transfer balance account prior to the indexation, and at any time between 1 July 2017 and 30 June 2023 had fully utilised or exceeded their personal transfer balance cap (range between 1.6 million to 1.7 million) – their personal transfer balance cap will not change.
Example: A member’s personal transfer balance cap on 1 July 2021 was 1.65 million. This had been exceeded by $4,000 the following month, but the excess had been commuted before 31 December 2021 under the transitional rules.
Just before indexation, the balance of the personal transfer balance account was $1.65 million. In this instance, the personal transfer balance cap remains at $1.65 million.
This extends to members that once met or exceeded their personal transfer balance cap, and have reduced the balance through commutations/taking payments as lump sum, in hopes of commencing a new retirement phase income stream after 1 July 2023, thus taking advantage of the new indexed balance cap.
In this instance too, the cap would remain the same. Your personal cap will always be based on the cap when you first started to have a transfer balance account.
A member who has not used the full amount of their personal transfer balance cap prior to 1 July 2023
When members have not used the full amount of their personal transfer balance cap, the personal transfer balance cap will be proportionally indexed based on the highest-ever balance of the transfer balance account.
This is calculated by first identifying the highest-ever balance of the transfer balance account, then multiplying the unused cap percentage by $200,000.
Simple Fund 360 will check for each member account (from 30/06/2017 or first TBAR entry to 30/06/2023) to determine when the highest balance existed.
Note
If the highest balance was in the period up to 30 June 2021, then the cap limit for the period of the highest balance will be 1.6 million
If the highest balance was in the period from 1 July 2021 to 30th June 2023, then the cap limit for the period of the highest balance will be the member's personal transfer balance cap.
Example 1
A member has the following events recorded in Simple Fund 360.
Their personal transfer balance cap from 1 July 2021 is 1,625,000
| Date | Narration | Value | Balance |
| 30/06/2017 | Existing Pension | 500,000 CR | 500,000 |
| 02/08/2017 | New Pension | 700,000 CR | 1,200,000 |
| 01/07/2018 | Commutation | 300,000 DR | 900,000 |
| 01/07/2019 | New Pension | 100,000 CR | 1,000,000 |
| 30/07/2021 | New Pension | 100,000 CR | 1,100,000 |
In this case, the member’s highest balance prior to the end of the 2023 financial year (can be any date) is $1,200,000. This occurred before 1 July 2021. The member has also not exceeded their personal transfer balance cap at any time prior to 1 July 2023.
The new personal transfer balance cap is worked out as follows:
1 - (1,200,000 /1,600,000) (Highest balance /Cap limit for the period of highest balance) (Rounded DOWN to the nearest whole number)
= 0.25 X 200,000 (Indexation amount)
= 50,000
The member’s personal transfer balance cap will be 1,675,000 (1,625,000 + 50,000).
Example 2
A member has the following events recorded in Simple Fund 360.
Their personal transfer balance cap from 1 July 2021 is 1,625,000
| Date | Narration | Value | Balance |
| 30/06/2017 | Existing Pension | 500,000 CR | 500,000 |
| 02/08/2017 | New Pension | 700,000 CR | 1,200,000 |
| 01/07/2018 | Commutation | 300,000 DR | 900,000 |
| 01/07/2019 | New Pension | 100,000 CR | 1,000,000 |
| 30/07/2021 | New Pension | 300,000 CR | 1,300,000 |
In this case, the member’s highest balance prior to the end of the 2023 financial year (can be any date) is $1,300,000. This occurred after 1 July 2021. The member has also not exceeded their personal transfer balance cap at any time prior to 1 July 2023.
The new personal transfer balance cap is worked out as follows:
1 - (1,300,000 /1,625,000) (Highest balance /Cap limit for the period of highest balance) (Rounded DOWN to the nearest whole number)
= 0.20 X 200,000 (Indexation amount)
= 40,000
The member’s personal transfer balance cap will be 1,665,000 (1,625,000 + 40,000).
TBAR Cap Summary in Simple Fund 360
Download a TBAR Cap Summary CSV across your entire firm to evaluate how your clientele will be affected by the TBAR Indexation from 1 July 2023.
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From the Main Toolbar, hover your Cursor over Connect. |
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Select TBAR Management from the list. |
Click TBAR Cap Summary to download a CSV file across your entire firm.
This CSV file will detail:
- Fund Name & Fund Code
- Member Name, Age (30/06/2023), TSB and number of pension accounts
- First Pension Start Date, balance, remaining cap and highest balance
- Unused % and Personal Cap at 01/07/2023