Ludovic Theau from Australian Ethical speaks to Laurence Parker-Brown from The Inside Network on what has changed across this investment theme in the last few years. The Inside Adviser
The average financial adviser is older and brings in more revenue than they did a year ago, but that hasn’t translated into a fatter salary according to data from Adviser Ratings.
Transfer balance, contribution caps set to increase
The Australian Tax Office (ATO) has flagged an increase in both the Transfer Balance (TBC) and Total Superannuation Balance (TSB) caps, which impact everything from the eligibility to make contributions, tax exemption of earnings and even the co-contribution.
Following the release of the consumer price index (CPI) figures earlier this week, the TBC and TSB will broadly be increased to $1.7 million from the original starting point of $1.6 million on 1 July 2017. The increase will apply from 1 July 2021 and offer immediate opportunities for those who are yet to commence an account-based pension from their superannuation account.
For those yet to commence a pension and therefore with a current TBC of $1.6 million, this will increase to $1.7 million from 1 July 2021 allowing another $100,000 to be rolled into the tax-exempt pension phase. For those who have already commenced a pension the treatment is, as usual, a little more complicated.
According to the ATO, if your total pension balance exceeded $1.6 million at any point since 1 July 2017 and 30 June 2021, the $1.6 million cap remains, and you are ineligible to establish any further pensions. For the remainder of pensioners who have a pension, but for whom that pension has always been below $1.6 million, their TBC will be personalised and indexed based on their highest-ever balance.
According to the release, if your balance was between zero and $160,000, your TBC will increase by between $91 and $100,000 taking it to $1.691 million to $1.7 million. For balances of $960,000 to $1,120,000 this will be $1.631 and $1.64 million and so on. Importantly, information regarding your personal TBC will be available via the ATO’s online portal.
The change will also apply to those seeking to make further contributions, increasing the threshold at which you can still make non-concessional contributions and receive government co-contributions from $1.6 million to $1.7 million.
The complexity of the changes offers opportunities for financial advisers to add further value but once again requires knowledge of individual clients’ personalised TBCs.
