From July everyone will have a personal super transfer balance cap

Australian Financial Review

22 March 2017

Sam Henderson

Hi Sam, I understand that a little known aspect of the new superannuation rules is that if someone has two super funds, with $1.6 million in each, then they can have $3.2 million in a tax- free pension. Can you please confirm this. Andrew


Unfortunately Andrew, this is not true for an individual. A couple may each have $1.6 million of assets supporting a super pension, giving rise to a combined tax-free pension of $3.2 million, but the individual level is set at $1.6 million. This comes into effect on the July 1. After that date, any amount in excess of the $1.6 million “balance transfer cap” will need to be placed back into an accumulation account, where earnings will be taxed at 15 per cent and capital gains at 10 per cent or 15 per cent, depending on how long the asset is held for. From July each person will have their own “transfer balance account”. Like a bank account, you will have credits when you transfer super interests into your tax-free pension. The only situation where some dispensation may arise is in the event that someone receives a reversionary pension, as they will be given 12 months before a super inheritance is counted towards the beneficiary’s transfer balance cap to allow the beneficiary to organise their financial arrangements.

Your tax file number will link all of your super funds. It does not matter how many you have. According to the Australian Tax Office, “the transfer balance cap applies to the total amount of superannuation that has been transferred into the retirement phase. It does not matter how many accounts you hold these balances in.”

Super fund providers will be required to report all movements of customers into pension phase, and no doubt those already in pension phase as at July 1.


Hi Sam. I am 70 years of age, my wife is 66. Can we use the existing $540,000 three-year bring forward rule, or are we stuck with our annual non-concessional $180,000 limit? Ian

Ian, because you are over 64, you can only utilise the annual non-concessional cap of $180,000 this

financial year. That amount drops to $100,000 from the next financial. The only time a person over 65 is able to utilise the three-year bring-forward provision is if they have turned 65 during the financial year and they have continued to meet the work test in the same year in which the non-concessional contribution was made. For example, if I turned 65 in December 2016, I can still make a $540,000 non- concessional contribution by June 30, as long as I work 40 hours over 30 consecutive days.


Hi Sam, my question concerns super contributions in the financial year in which a wage earner, aged between 60 and 64, retires. Is it permissible to salary sacrifice into super before retirement in the first part of the financial year, and then after retirement make an after-tax contribution to super on which a tax deduction is claimed, all within the same financial year? If so, are there separate caps for each type of contribution? And will the current rules be unchanged after July 1? Robert


Robert. Yes, the rules are changing on July 1 for this too. This is currently covered in Section 290 of the Income Tax Assessment Act 1997, which details what you can claim as a tax deduction for super contributions.


Right now, if you are employed (and not self-employed), you can only make super contributions as you earn the money via your salary, hence the term salary sacrifice. However, someone who earns 10 per cent or more from self-employment (or investment earnings if retired and under age 65) is able to make a lump sum contribution and claim a tax deduction for it. For those over 50 that amount is $35,000 and its $30,000 for those under 50.

From July, everyone will be limited to a $25,000 concessional contribution limit and the 10 per cent rule will be abolished. This will mean employees can make lump sum super contributions any time during the financial year without having to meet the 10 per cent rule.

In your case, if your earnings from being an employee exceed 10 per cent of your reportable assessable income (including fringe benefits tax and super contributions) then you will not be able to make a lump sum, or personal, contribution.

If you’re retired and under 65, we often use this opportunity to help reduce a clients’ capital gains tax liability by maximising their concessional contribution limits. This reduces their taxable income and thus their tax payable. You get a double-shot benefit for couples when assets are held in joint names.