Transfer balance cap
What is the transfer balance cap?
The transfer balance cap is the maximum amount that you can transfer from your accumulation account into your retirement account. Currently the transfer balance cap is $1.7 million. After you retire any amounts over the cap need to be transferred into an accumulation account or withdrawn taken out as a lump sum. Earnings on any excess amount in your retirement account are taxed at 15%.
This rises to 30% if you have previously had to pay the excess transfer balance tax.
Are the transfer cap and the account balance the same thing?
No. The transfer cap only relates to amounts you shift from your accumulation super account to your retirement account during the retirement phase.
Funds that sit in your retirement account after you’ve transferred your super into it can increase your balance through investment earnings. While these can tip your account balance over $1.7 million, they are not part of your initial transfer and therefore won’t be affected by the transfer cap.
What do I do if I think I’ll be over the transfer balance cap?
Because the way your transfer balance is calculated through a system of credits and debits, it’s always best to talk to a retirement planning specialist such as a financial advisor at your Industry SuperFund. Options include using a transition to retirement strategy to reduce your balance or making spouse contributions to lift your partner’s balance.
Talk with a planner at your Industry SuperFund
Is there a cap on defined benefit funds?
Yes, there is. Currently the cap is $1.7 million, but there are special rules on how the cap is applied depending on whether the defined benefit pension is taxed or untaxed, and cases where you may have also had an account-based pension. Again, it is strongly advised to seek the guidance of a financial planner specialising in retirement.