Written by

Mark Ellem

The general transfer balance cap (TBC) is the cap that determines how much an individual can transfer into retirement phase and will increase from the current $1.7 million to $1.9 million on 1 July 2023. This is the second time that the general TBC has been lifted. 

Quick overview 

  • The general transfer balance cap (TBC) increases by $200,000 to $1.9 million on 1 July 2023. 
  • Not everyone will be entitled to an increase in their personal transfer balance cap (TBC). 
  • A person who first commences a retirement phase income stream on or after 1 July 2023 will have a TBC of $1.9 million. 
  • A person who has fully utilised their personal TBC prior to 1 July 2023, will not be entitled to any of the TBC increase – their personal TBC will not change. 
  • For everyone else, they will be entitled to a proportion of the $200,000 increase and will have a personal TBC of between $1.6 million and $1.9 million. The proportion of entitlement to the indexation of the general TBC is based on their used cap percentage, calculated at the time of their highest TBA balance.

An individual’s TBC is not straight forward

As a consequence of the first time the general TBC was indexed on 1 July 2021 and increased from $1.6 million to $1.7 million, we were introduced to the concept of a ‘personal transfer balance cap’. After the indexation of the general TBC on 1 July 2021, many individuals had a personal TBC that was less than the new general TBC. From that time, individuals and their advisers needed to be aware that for any strategy that included a reportable transfer balance account event, the relevant cap may not be the general TBC, but a lower personal TBC. Using the wrong TBC amount could result in the individual exceeding their personal TBC and incurring penalty tax. 

With the upcoming second indexation of the general TBC on 1 July 2023, the cohort of individuals who will have a personal TBC not equal to the general TBC will only increase and potentially lead to more confusion and TBC calculation errors. To reduce the potential for such calculation errors, it will be important to ensure that all TBA events have been reported to the ATO by 30 June 2023, or very soon after, to allow the ATO to correctly calculate an individual’s personal TBC. At least for this round of indexation, the latest due date for TBA events that occur in the 2022-23 income year is 28 October 2023. 

The details 

We have prepared the following articles, which include case studies to assist you with determining the effect of this impending 1 July 2023 change to the general TBC: 

We will support you over the coming months in order to understand and implement these changes with your retired and retiring clients in preparation for 1 July 2023, including:

  • An update to our flow chart ‘Are you entitled to increase your transfer balance cap?’
  • An update to our TBC indexation calculator. 
  • A CPD+ webinar on the implications of the TBC indexation.

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