Higher inflation could mean the transfer balance cap (how much you can put in a tax-free income stream) increases from $1.7 million to $1.8 million next July.
Q: As someone with an SMSF who has reached his preservation age, I am looking to retire in the next 12 months. I understand theand can only increase in lots of $100,000 depending on the consumer price index as of December. What I’d like to confirm is when this cap is likely to move up to $1.8 million. My calculation on $1.7 million x 5.895 per cent=$100,215.
A: When the Coalition government introduced a restriction on how much superannuation could be converted from the saving phase to the tax-free retirement pension phase – called the general TBC – it took four years for a $100,000 increase to occur. This is then multiplied by the original TBC amount of $1.6 million with the result being rounded down to the nearest $100,000.
Day says that if you divide 123.9 by 110.0 and multiply this by $1.6 million, you get a figure above $1.8 million. So, unless we see deflation between March and December this year, the indexation amount will be more than $1.8 million, resulting in a general TBC figure for 2022-23 of $1.8 million. As a result, someone with more than $1.7 million of retirement savings in an accumulation account who knows the general cap entitlement will increase to $1.8 million may be better off waiting until July 1 to start their first retirement phase pension.
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