SO, HIGH INFLATION NOT ALL BAD?
With the recent release of the CPI figures for the December 2022 quarter, changes are set for superannuation as of 1st July 2023.
This has not yet been formally announced by the ATO so any advice will be pending the formal announcement and the outcome of the Federal Budget in May (the government could in theory freeze any changes that are currently scheduled to occur).
What are these proposed changes?
Based on the December CPI figures, the general Transfer Balance Cap is set to increase to $1.9M.
Who might benefit from this change?
For those that have not previously started a pension from their superannuation. The amount that can be transferred into the retirement phase of superannuation will be $1.9M (this is increasing from $1.7M). This means for some, an additional $200,000 may be held in the tax-free part of the superannuation system.
Existing superannuation pensioners. If you already have a pension prior to July 2023, the ability to increase what is held in pension phase will depend on your own personal Transfer Balance Cap. Some people may not be able to increase the amount in pension phase at all (if the prior general transfer cap had been fully utilised and this was either the original cap of $1.6M or the current cap of $1.7M).
People with high balances who are seeking to make further contributions. Additional non-concessional contributions (where a tax deduction isn’t claimed) may be possible for those members with balances between $1.7M and $1.9M. Additionally, the bring forward rule could be fully utilised for those members with balances under $1.68M. This means a non-concessional contribution up to $330,000 could be potentially made in a single financial year from July 2023.
What strategies should you be considering?
For those considering starting a pension in this current financial year should you defer and wait until 1st July 2023?
Those considering contributions above the annual cap of $110,000 in the current financial year may be better deferring the contribution amount above the annual cap until after the changes take effect.
Superannuation members with Transition to Retirement Pensions who are reaching age 65 prior to July 2023 may consider whether to defer converting to pension phase until after the changes take effect.
Please note that each of these strategies will depend on your individual circumstances and it is important to seek personal advice before taking any action.
START PLANNING NOW AND SPEAK TO YOUR EXPERIENCED BOYCE ADVISER OR ACCOUNTANT
