What is the transfer balance cap?

Business management styles you should avoid
Business management styles you should avoid
18 February 2021
What you need to know about luxury car tax
What you need to know about luxury car tax
25 February 2021

What is the transfer balance cap?

What is the transfer balance cap

What is the transfer balance cap

The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.

At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million.

Exceeding the personal transfer balance cap means that you have to:

  • Commute the excess from one or more retirement phase income streams.
  • Pay tax on the notional earnings related to that excess

The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’.

The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams.

CONTACT US