Understanding ‘Transfer Balance Cap’ and ‘Total Superannuation Balance’

The ‘transfer balance cap’ is a limit on the total amount of superannuation that can be transferred into the
‘retirement phase’ over the course of an individual’s lifetime, the current transfer balance cap is $1.6 million. All of
an individual’s retirement phase account balances will be included when working out this amount. It does not
matter how many accounts an individual may hold. Amounts moving in and out of an individual’s retirement phase
accounts will be recorded and tracked by the ATO in a ‘transfer balance account’ (see below). An individual will
be liable to pay excess transfer balance tax if their transfer balance account exceeds the cap limit.

The ‘total superannuation balance’ has been introduced as part of a new test to determine an individual’s
eligibility to make certain contributions. An individual’s total superannuation balance is essentially the total value
of their accumulation and retirement phase interests and rollover amounts not yet included in those interests
across all of their superannuation providers.

This means that you will need to comply with two separate $1.6 million limits from 1 July 2017:
– the $1.6 million transfer balance cap limit on the value of the interest that supports an individual’s retirement
phase’ income streams; and
– the $1.6 million total superannuation balance in order to determine am individual’s eligibility for :
– the non-concessional contributions cap and the two- or three-year bring-forward period;
– the government co-contribution;
– the tax offset for spouse contributions; and
– from 1 July 2018, an individual’s eligibility to carry-forward concessional contributions.

Note: For trustees of a self-managed superannuation fund, the individual’s total superannuation balances will
also determine whether the fund can use the segregated assets method to calculate exempt current pension
income (ECPI).

Should you have any question in regards to transfer balance cap and total superannuation balance, please feel free to contact us on 03 9557 3138 or info@icarsuper.com.au