The ATO anticipates that the general Transfer Balance Cap will be indexed in 2021, after it was not indexed for 2020. The eventual indexation of the Transfer Balance Cap to $1.7 million will make the system more complicated.
Like many superannuation caps and thresholds, the Transfer Balance Cap is subject to indexation.
Starting at $1.6 million, the Transfer Balance Cap would have been indexed from 1 July 2020 if the All Groups Consumer Price Index (CPI) for the December 2019 quarter was 116.9 or higher. But, as the ATO notes, the CPI figure was 116.2, and so the Transfer Balance Cap will not be indexed in 2020.
The ATO anticipates the Transfer Balance Cap will be indexed on 1 July 2021, as the December 2020 figure is likely to exceed the threshold for indexation.
The indexation of the Transfer Balance Cap is going to make the system more complicated, with different caps for different people.
“When the general transfer balance cap is indexed to $1.7 million there will be no single cap that applies to all individuals. Every individual will have their own personal transfer balance cap, somewhere between $1.6 and $1.7 million, depending on their circumstances,” says the ATO.
Ron Lesh, Managing Director of software maker BGL, said the indexation of the Transfer Balance Cap will be an issue for the industry, and one that needs to be addressed by the government and the ATO.
“We dodged a bullet this year as the CPI did not reach the level where the $1.6m pension cap was indexed,” Lesh said.
“The inability of the ATO to provide automated (API) access to pension balances looms as a huge problem for the industry. If the current method of indexation remains law and the ATO cannot provide automated access to pension data, it is going to make it very difficult for SMSF administrators to have confidence around account balances.”