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Hi, I have a few questions surrounding pension accounts, transfer balance and contributions. Any assistance will be greatly appreciated.
If a member commenced a pension in FY23, and commuted the full limit of the TBC of 1.7 Million, in FY24, when the cap increased to 1.9 million, could an additional 200k be transferred into a new pension account to maximise the new limit? Or is the member stuck with what the cap was when they first commuted to pension phase?
If a member's total balance is equal to or greater than the TBC, and there is still an accumulation account existing, the member cannot make any non-concessional contributions, right? Is this regardless of whether the balance is in pension or accumulation phase?
Is it correct to say downsizer contributions made by a member count towards that member's transfer balance cap, and if the cap has already been maximised, downsizer contributions cannot be made?
Do small business CGT provisions for contributing proceeds to super affect or interact with the transfer balance cap?
Thank you
Hi Jason
Re question 1 by starting a pension in the 2022/23 year that locks in the transfer balance cap that existed at that year being $1.7M.
The ATO has summarises the rules at:
The ATO gives an example that states:
"Example: transfer balance account reduced to zero before indexation
Simon started a pension valued at $1.6 million on 1 July 2020 and has other assets in super.
He commutes his pension in full on 30 June 2021 and gets a debit of $1.6 million in his transfer balance account on that day.
The balance of Simon's transfer balance account at the end of the day on 30 June 2021 is nil.
Simon planned to start a new pension valued at $1.7 million on 1 July 2021 to take advantage of the increased general transfer balance cap.
Simon isn't entitled to proportional indexation of his personal transfer balance cap as his highest ever balance before indexation was equal to his personal transfer balance cap. His personal transfer balance cap remains at $1.6 million.
If Simon starts a new pension valued at $1.7 million, he will have an excess transfer balance that he would need to commute.
He would also have to pay excess transfer balance tax."
Re question 2 if your total superannuation balance (TSB) is equal to or greater than the general transfer balance cap at the end of the previous financial year then your non-concessional contribution cap is $0 for the current financial year. The TSB is made up of both pension and accumulation accounts.
Re question 3 a downsizer contribution is a non-concessional contribution. However a downsizer contribution does not count towards the contribution cap. The ability to make a downsizer contribution is not effected by your total superannuation balance.
The ATO has further details re downsizer contributions at:
The ATO states:
"A downsizer contribution is a non-concessional contribution, but it doesn’t count towards the contribution cap. It will not affect your total superannuation balance until it is re-calculated at the end of the financial year.
However, downsizer contributions count towards your transfer balance cap. This cap applies when you move your super savings into retirement phase, and is taken into account in determining eligibility for the age pension."
Re question 4 small business CGT superannuation contributions that comply with the rules are excluded from the transfer balance cap rules.
Thanks
The Auditors Institute