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Transfer balance cap

Transfer balance cap

Section: 19.1

From 1 July 2017, a transfer balance cap will apply to limit the amount of superannuation a client can transfer to retirement phase income streams.

Broadly, the transfer balance cap operates by measuring the value of a client's existing retirement phase income streams at 30 June 2017, as well as any new income streams commenced on or after 1 July 2017, against their transfer balance cap.

An important key to understanding the transfer balance cap is that it measures net transfers to retirement phase (ie the purchase of retirement phase income streams and commutations from retirement phase income streams). It does not include earnings, losses or income stream benefits that occur within a retirement phase income stream.

Where a client exceeds their transfer balance cap, they are generally subject to tax on a notional earnings amount, and are required to commute the excess out of retirement phase. The commutation may be taken as cash or rolled back to accumulation (if the excess is not a death benefit income stream).

Last modified: Wednesday, July 24, 2019