From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account to a tax-free “retirement phase” account to receive an account-based pension income.
This is known as the super “transfer balance cap”. If you have more than one super account, the cap applies to the combined amount in all of your pension phase accounts. You will be able to make multiple transfers into the retirement phase as long as you have available cap space.
The amount of the cap will start at $1.6 million, and will be indexed periodically in $100,000 increments in line with the consumer price index (CPI).
The cap relates to the amount you transfer into your retirement phase account. There is no limit to the amount of money you can have in your accumulation super account(s). If your pension account grows over time to more than $1.6 million, you won’t exceed your cap. If your pension account goes down over time, you can’t “top it up” if you have already used your cap.
If you are currently in excess of your transfer balance cap, then you may have to remove the excess from retirement phase and pay tax on the earnings in excess of the cap.
Different tax rules will apply if you receive a capped defined benefit income stream as you usually can’t transfer or remove excess amounts from these pensions. These pensions are commonly provided by defined benefit funds, but may be provided by other funds, including some self-managed super funds (SMSFs).
If you have to move assets out of your retirement phase account back into your accumulation account to be under the cap before 1 July 2017, capital gains tax (CGT) relief is available to your super fund to reset the cost base(s) of these assets. CGT relief is available if your fund holds the assets between 9 November 2016 and 30 June 2017.