If you are approaching retirement and planning to commence a pension from your superannuation soon, the following information may be of importance to you.

The Transfer Balance Cap (TBC) is the tax-free cap that each individual is entitled to use when commencing a pension in retirement from their superannuation balance. Based on the movements of the Consumer Price Index (CPI), the Transfer Balance Cap rises in $100,000 increments and any amounts over the cap remain in the accumulation phase, which is taxed at 15% on its earnings.

Following the release of the latest Consumer Price Index data in January, the General Transfer Balance Cap is set to increase from $1.9 million to $2 million from 1 July 2025. This means that from 1 July 2025, those commencing a pension will be able to hold $2 million in the tax-free pension.

If you are planning to start a pension soon, you may want to consider whether it is best to start before or after 1 July 2025. By commencing your pension before this date, your Transfer Balance Cap will be limited to $1.9 million, or if you wait until after 1 July 2025 your pension amount increases to $2 million. Superannuation and retirement planning is complex and we recommend that you should seek advice before you commence a pension. It may not automatically be in your best interest to wait until 1 July 2025.

It is also important to note that the increase in the Transfer Balance Cap can affect other superannuation thresholds, such as the eligibility to make contributions, receive co-contributions and tax offsets. In addition, it may also affect your estate planning.

If you are planning to retire soon and commence a pension, we recommend contacting our SMSF Specialist Advisor Selina Trace, or your Financial Advisor to discuss how the increase in the transfer balance cap may affect your retirement decisions.

Kind regards,
GPG Business Advisory