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Transfer balance cap for retirement phase accounts

There will be a new transfer balance cap for retirement phase accounts as of 1 July 2017.

Individuals may have an excess transfer balance and have to pay excess transfer balance tax if they exceed their transfer balance cap.

These changes may affect retirees who receive:
– One or more account-based income streams
– A combination of one or more account-based income streams and capped defined benefit income streams.

Your excess transfer balance can be calculated by adding the amount that exceeds the transfer balance cap and the earnings on the excess amount.

The earnings individuals make on their excess transfer balance are notional earnings, because determining actual earnings on a specific portion of overall assets can be difficult. The earnings are compounded daily, that is, each day the earnings are calculated and credited to the transfer balance account, thus increasing the amount that excess transfer balance earnings.

You may be liable to pay tax from the period you start to have an excess transfer balance until the balance account is no longer in excess. Excess transfer balance tax cannot be paid by your super provider. For an excess transfer balance in 2017-18, the tax rate is set at 15 per cent.

From 1 July 2018, the tax rate will be 15 per cent for the first time you have an excess transfer balance but raises to 30 per cent for any subsequent excess transfer balances.


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