Purposes of Transfer Balance Cap
The TBC has two main purposes:
1. To limit the amount of tax-free income that can be generated in retirement; and
2. To reduce the reliance on the Age Pension.
- The TBC is designed to limit the amount of tax-free income that can be generated in retirement. Superannuation earnings in the accumulation phase are taxed at a maximum rate of 15%, while earnings in the retirement phase are tax-free. This means that individuals with large amounts of superannuation could potentially use the tax system to generate a significant amount of tax-free income in retirement.
- The TBC is an important part of the government’s retirement income policy. It is designed to ensure the sustainability of the retirement income system and to prevent individuals from using the tax system to generate excessive amounts of tax-free income in retirement.
- The TBC does not apply to amounts that are transferred from an accumulation account to a pension account before 1 July 2017.
- The TBC is a key part of the government’s reforms to the superannuation system which are designed to make the system more sustainable and equitable.
- The TBC is one of the measures that the government has introduced to address the issue of intergenerational equity in the superannuation system.
- The TBC ensures that people who have saved more for their retirement are not able to receive a tax-free income in retirement that is greater than the average wage.
- The TBC also limits the amount of money that can be transferred into a retirement income stream, which reduces the reliance on the Age Pension.
What is a Transfer Balance Cap?
A Transfer Balance Cap (TBC) is a limit placed on the amount of superannuation that can be transferred from an accumulation account into a retirement income stream account. The TBC was introduced by the Australian Government on 1 July 2017 in order to manage the sustainability of the retirement income system. The TBC is currently set at $1.6 million and is indexed in line with the Consumer Price Index (CPI).