A senior actuary has reminded advisers the indexation likely to be applied to the general transfer balance cap (TBC) from the start of the 2024 financial year will have flow-on effects to other critical components of superannuation.
“Another change we need to prepare for at 1 July 2023 is, as a result of this change to the TBC, the change to the [non-concessional contributions] bring-forward thresholds,” Accurium principal Melanie Dunn told attendees of a technical webinar she hosted last week.
It is expected the official consumer price index (CPI) figure of 7.8 per cent for the December 2022 quarter released this week will trigger the next round of indexation to be applied to the general TBC, increasing it from its present amount of $1.7 million to $1.8 million or even $1.9 million.
If the cap increases to $1.8 million then from 1 July 2023, individuals with a total super balance below $1.58 million will be able to access the full three-year non-concessional bring-forward provision of $330,000. Currently this threshold is $1.48 million.
Similarly, people with a total super balance falling between $1.58 million and $1.69 million will be able to use two years of the non-concessional contributions bring-forward provisions amounting to $220,000 from the beginning of the 2024 income year.
This band currently covers total super balances between $1.48 million and $1.59 million.
Further, from 1 July 2023, Individuals with a total super balance falling between $1.69 million and $1.8 million will not be eligible to use these bring-forward provisions. Currently this restriction applies to people with a total super balance falling between $1.59 million and $1.7 million.
The official CPI figure of 7.8 per cent for the December 2022 quarter also opens up the possibility of having the government raise the general transfer balance cap to $1.9 million via the indexation formula on 1 July 2023.
Should this happen, at 1 July 2023, individuals with a total super balance of $1.68 million or less will have access to the full three years of the non-concessional contributions bring-forward provisions of $330,000, people with a total super balance of $1.79 million or less will be able to use two years of the bring-forward provisions to the value of $220,000 and superannuants with a total super balance of between $1.79 million and $1.9 million will not be able to benefit from the bring-forward rules.
Dunn pointed out while these thresholds will be shifting on account of the application of indexation to the general transfer balance cap, other associated amounts will not change.
“We’re not expecting any change [to the contributions caps themselves] because the caps are based on AWOTE (average weekly ordinary time earnings) and AWOTE hasn’t moved in the same way that we’ve seen the CPI move over the last year or two,” she noted.
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