According to the Australian Bureau of Statistics (ABS), annual trimmed mean inflation fell to 3.2 per cent in December from an upwardly revised 3.6 per cent in September. With the All Groups CPI figure reaching 139.4 for the December 2024 quarter, the general transfer balance cap will be indexed for the 2025–26 year.
Clients commencing their first retirement phase income stream in 2025–26 will start with a personal transfer balance cap (TBC) of $2 million.
Tim Miller, technical and education manager for Smarter SMSF, said it was already expected that the indexation to $2 million was highly likely, but the CPI figures confirmed it.
“We knew it was likely because the September quarter was 139.1 and it had already been speculated that indexation would see the TBC indexed from $1.9 million to $2 million on the 1 July 2025, so now legislatively that will occur,” he said.
“The only thing that might change it is an election and an announcement by the government, but that $2 million is now the expected and legislative result from the 1 July.”
Miller said although some in the sector were hoping for the TBC to be indexed to $2.1–2.2 million, he didn’t believe it was likely for a few more years.
“If people are keen on $2 million or $2.1 million, I wouldn’t hold your breath because we need to get to 144.4 and we’re clearly not there today,” he said.
“Whether we’re there next year for another cap increase we’ll have to wait and see and again the numbers indicate that it’ll be touch and go to get that again. It tends to be on a two-year cycle, and the crazy inflation numbers that we saw a couple of years ago, we’ve dropped back a little bit from there, so we won’t see $2.1 million unless there is some form of an announcement by the government which we’re not expecting to see.”
Anthony Cullen, senior SMSF educator for Accurrium, said the increase to $2 million would occur barring a change to the legislation or potential freezing of the thresholds in the budget.
Cullen said the $2 million TBC would be accessed by anybody who has not utilised their transfer balance account up until 30 June this year – immediately before the increase in the threshold.
“Anyone who has had a retirement phase income stream prior to each occurrence of indexation may be entitled to a proportional increase in the TBC,” he said.
The increase in the TBC also affects other superannuation rules and concessions, including the total superannuation balance, which would also increase to $2 million.
David Busoli, SMSF Alliance principal, said contribution cap increases are measured against average weekly ordinary time earnings so it would not change, though the application of the non-concessional contribution three-year bring forward rule would be against a higher TBC.
Busoli added the table below indicates how the change in the TBC applies:
|
TSB @ 30 June 2024 |
Max NCC |
|
Less than $1.66 million |
$360,000 |
|
$1.66 million to under $1.78 million |
$240,000 |
|
$1.78 million to under $1.9 million |
$120,000 |
|
$1.9 million and over |
$0 |
From 1 July 2025
|
TSB @ 30 June 2025 |
Max NCC |
|
Less than $1.76 million |
$360,000 |
|
$1.76 million to under $1.88 million |
$240,000 |
|
$1.88 million to under $2 million |
$120,000 |
|
$2 million and over |
$0 |
