New limits on retirement products
This limit is known as the transfer balance cap
The transfer balance cap applies to the amount you can transfer in your lifetime to retirement phase accounts. It includes all retirement phase superannuation income streams whether they commenced before or after 1 July 2017.
The transfer balance cap starts at $1.6 million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000.
If you have a capped defined benefit income stream, the rules around this are complex. We recommend you seek advice from a financial adviser to understand how the rules apply to you.
What counts towards your cap?
If you have more than one super income stream account in the retirement phase, the cap applies to the combined amount transferred into all of those accounts. Retirement phase income streams include:
- Account based pensions, including any pensions you are receiving or start to receive from a deceased person’s super account.
- Transition to retirement (TTR) pension income streams that are in retirement phase.
A TTR pension moves to the retirement phase automatically when you reach age 65, or meet certain other conditions of release (retirement, permanent incapacity or terminal illness) and notify your super fund.
Some other types of income streams (such as defined benefit income streams and some market linked pensions) will also impact your transfer balance cap. The way these income streams are valued under the cap is complex. You should seek advice if you have one of these income streams.
What will happen if I exceed the limit?
If you exceed your transfer balance cap, you may have to:
- Remove the excess from one or more retirement phase income streams.
- Pay additional tax.
In the 2017-18 financial year, this additional tax is 15%. From 1 July 2018, the additional tax for the first breach of the cap will be 15% and subsequent breaches will be 30%.
If you have an excess transfer balance amount that is related to a capped defined benefit income stream, penalty tax is determined in a different way. This is because most capped defined benefit income streams are ‘non-commutable’.
This means that you usually can’t take steps to reduce your excess transfer balance from these types of accounts by removing a lump sum. Instead, you may have to pay additional amounts of tax on certain income payments you receive from capped defined benefit income streams. These rules are complex.
If you think you might exceed the cap, you should discuss your options with a financial adviser.
How will the ATO notify me if I exceed the cap?
The Australian Taxation Office (ATO) collects information from all super funds and keeps a record of the amount you have in the retirement phase of super.
Where you exceed your cap and do not remove the excess, the ATO will issue you with an excess transfer balance determination. This will specify how much you will need to remove from retirement phase and by when. The rules for capped defined benefit income streams are different. For more information visit the ATO website.
The rules around the Transfer Balance Cap are complex, we recommend you seek advice from a financial adviser or speak to the ATO.
Where can I view my transfer balance?
You can view your total transfer balance using ATO online services through myGov. We’re only able to show you information you hold with us, which doesn’t include accounts you may have with other providers.
Does investment growth count towards my cap?
No, you won’t exceed your cap if the total amount in your pension accounts grows over time through investment earnings.
Get in touch
For more information about these changes, call us on 1300 55 7586 between 8am and 7pm AEST (8pm daylight saving time) Monday to Friday.
This communication is issued by NULIS Nominees (Australia) Limited (ABN 80 008 515 633 AFSL 236465) (NULIS). It is for general information and has not taken into account any particular person’s objectives, financial situation or needs. Before deciding to make a contribution to your superannuation, interested persons should consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. The information contained in this communication is current as at 1 July 2017. Any changes in the law or policy subsequent to this date have not been incorporated in this material.
NULIS is the Trustee of the MLC Super Fund (ABN 70 732 426 024). Plum Super is part of the MLC Super Fund. NULIS is part of the National Australia Bank (NAB) group of companies. An investment with NULIS is not a deposit or liability of, and if not guaranteed by NAB. It is recommended that you consider the relevant Product Disclosure Statement (PDS) before you make any decisions about your superannuation. To obtain a copy of the relevant PDS please call us on 1800 952 955. Neither NULIS nor any other company in the NAB group of companies accepts any liability whatsoever for any decision that is made on the basis of or in reliance of the information contained in this material. NULIS is not a Registered Tax Agent and any tax information is of a general nature and should not be relied upon to determine your personal tax situation. It is recommended that you consult a professional tax adviser who is a Registered Tax Agent about your personal circumstances.