Superannuation Discussion + market volatility

[andye]

Yep. Sadly old enough to have full access. That cap is? And under 75 as well.

Total Super Balance Cap currently $3M
Transfer Balance Cap currently $1.9M

Say you had transferred in $1M when you opened pension account. Make lump sum withdrawal of 200k, you would still have $1.1M TBC space left. Need to make sure you don't exceed the TBC at any point as then you cant put any more in (even if you make further lump sum withdrawals) cant access any indexation (edited after further reading. It really is complicated)

If the TBC goes up in future due to indexation you dont get the full increase, only a proportion based on how much you've used already. (I think the calculation is [1-{Highest personal balance transfer/TBC at first transfer}]*annual increment).ATO apparently works this out for you

 

[SYD]

Total Super Balance Cap currently $3M

What “Cap” is that? Not aware of any “Total Super Balance Cap”?

Transfer Balance Cap currently $1.9M

Say you had transferred in $1M when you opened pension account. Make lump sum withdrawal of 200k, you would still have $1.1M TBC space left. Need to make sure you don't exceed the TBC at any point as then you cant put any more in (even if you make further lump sum withdrawals).

If someone opens a pension account with $1m, their residual TBC will be $900k (plus any prorata indexation)? I didn’t think you got a second bite to top up the pension fund (with the exception with “Transition to Retirement” and when the TBC is indexed? Also, a DBS pension will take a one-off chunk of the TBC.

If the TBC goes up in future due to indexation you dont get the full increase, only a proportion based on how much you've used already. (I think the calculation is [1-{Highest personal balance transfer/TBC at first transfer}]*annual increment).ATO apparently works this out for you

The calc is pretty straightforward and yes, MyGov displays your available TBC remaining including any prorata indexation.

 

[andye]

What “Cap” is that? Not aware of any “Total Super Balance Cap”?

I stand corrected. Its not called a cap (and will alter post).. The Total Super Balance does affect ability to make contributions however

From ATO:
If your total super balance is equal to or more than the general transfer balance cap ($1.7 million from 2021–22, $1.9 million from 2023–24) at the end of the previous financial year, your non-concessional contributions cap is nil ($0) for the current financial year.

If someone opens a pension account with $1m, their residual TBC will be $900k (plus any prorata indexation)? I didn’t think you got a second bite to top up the pension fund (with the exception with “Transition to Retirement” and when the TBC is indexed? Also, a DBS pension will take a one-off chunk of the TBC.

I thought you could and the Aware website does say you can move all your account-based pension back to super and start again. I'm sure DBS is more complicated

Remain happy to be corrected as its only my reading and I may have misunderstood

 

[Quickstatus]

The Transfer Balance Cap is indexed
In 2021 it was raised to $1.7
In 2023 it was raised to $1.9

The Transfer Balance Account is a record kept by the ATO of the amounts transferred from the Super accumulation account into the Super Pension account. Remember it is the highest balance achieved that is used by the ATO to calculate TBC indexation.
You can reduce the TBA with commutations but the highest ever achieved TBA balance is used to calculate the TBC indexation and available TBC cap space..

When the TBA is equal to or more than the TBC, the retiree's personal TBC indexation stop for all time and the available retiree's personal TBC cap space is Zero.

When the TBA is zero, the TBC continues to be indexed and the available TBC cap space is equal to the TBC as indexed from time to time until the first transfer occurs.

A retiree's personal TBC is dictated by the date a transfer is made.

TBC indexation when TBA is less than TBC but a transfer is made.
The indexation formula is:

[The highest balance ever achieved in the TBA] / [TBC at the time of the first transfer into the pension account]
Express as a % and round down to nearest whole number
Subtract from 100%
Calculate the change in indexation.
Apply the % to the change in indexation
The result is added to the original personal TBC

Example:

In 2021 the TBC is $1.7M
I transferred $1.0M into the super pension account
The highest balance in the TBA is $1.0M
The first year I transferred is 2021. My forever ever unindexed TBC is therefore $1.7M

In 2022 I dont transfer anything and the TBC indexation has not changed

In 2023 the TBC is indexed to $1.9M for those who have not commenced a transfer.
The indexation that applies to me is:
(1.0/1.7) = 0.5882 = 58.82%
Round down to 58%
100-58% = 42%
The difference in indexation is 1.9-1.7 = $0.2M
42% x $0.2M = 0.084
Add this to the first TBC: 1.7+0.084

The indexed personal TBC for me is then 1.784M
As I transferred $1.0M I still have $0.784 to transfer - this is the available cap space
If I have not yet transferred my personal TBC in 2023 would have been $1.9M
If I transferred $1.7M in 2021 my personal TBC forever remains at $1.7M


The ATO displays your personal indexed TBC and any available cap space in your MyGov >> ATO >> Super >> information >> Transfer Balance Cap

Defined schemes are treated a little differently. As I dont have a DBS, I cant answer this question as it pertains to the TBC.


Im not a super expert.......

 

[SYD]

I stand corrected. Its not called a cap (and will alter post).. The Total Super Balance does affect ability to make contributions however

From ATO:
If your total super balance is equal to or more than the general transfer balance cap ($1.7 million from 2021–22, $1.9 million from 2023–24) at the end of the previous financial year, your non-concessional contributions cap is nil ($0) for the current financial year.

Yes, the “non-concessional” contributions you can chuck in each year (currently $120k pa or $360k under 3yr “Bring forward” arrangements) cease once your total super balance reaches the TBC. They’re not tax deductible but a great way to top up your super if you have a cash windfall.

A handy loophole. The reference “Total Super Balance” is as reported for year ending 30 June (that funds have to report by the end of October). If your total super is still under the TBC (by a least $1), I believe you can still throw in $120k even though your actual super balance may have gone up since 30 June.

As above, the Concessional contributions aren’t affected and you can continue to contribute regardless of balance AFAIK.

I thought you could and the Aware website does say you can move all your account-based pension back to super and start again.

Yeah, I don’t fully understand the mechanics of doing that ie re entering the workforce but I would expect you’re stuck with the previous TBC used. So future indexation is pro-rata.

I'm sure DBS is more complicated

Not really. It’s a one off value. Set and forget.

 

[markis10]

The reference “Total Super Balance” is as reported for year ending 39 June

They sure have weird years in super land

 

[SYD]

They sure have weird years in super land

Parallax error…

 

[Quickstatus]

Parallax error…

Would be Fat fingers for me

 

[Brissy1]

Parallax error…

My response when Ms Brissy checks my driving speed (don't mention digital display)

 

[CaptJCool]

The DB schemes have a notional TBC value for super purposes but it’s irrelevant to the tax calculations.

There’s two tax calculations
1. Some super is untaxed when it goes in (State Govt) or untaxed because it never got paid in (Fed Govt) so is taxable income so marginal tax rates are charged regardless of your age
Eg

https://csc.sitecorecontenthub.cloud/api/public/content/b2e3e1fe84b2405a9b6d5a7c30fdcabc?v=d20e90bd

Tax and
your CSS
super

2. Defined benefit income cap tool | Australian Taxation Office That calculates a tax offset which reduces to 0
The DB threshold adjusts upward over time (akin the the TBC UPLIFT)

 

[CaptJCool]

I'm keen to know how to wash. . Have two funds, accumulation and pension both with same industry fund. Still contribute to accumulation via working and draw down 5% pension as required to do. I salary sacrifice into accumulation. So how do I clean it up?

Ask the Expert: Ways to minimise tax paid on super inheritance - News | InDaily, Inside South Australia

If you suffer serious ill health, you can withdraw super funds at any time to ensure super tax does not have to be paid by your beneficiaries.

www.indailysa.com.au

if this is not done
here are the taxing rules

Paying superannuation death benefits | Australian Taxation Office

Payment made to a person or trustee of a deceased estate after the member had died.

www.ato.gov.au

 

[openseat]

Can you require your super fund to pay a lump sum from the taxable component only? Or do they get to call the shots?

 

[andye]

Can you require your super fund to pay a lump sum from the taxable component only? Or do they get to call the shots?

Its proportional unfortunately

 

[openseat]

Its proportional unfortunately

Unbelievable, it's not their money.

 

[SYD]

Unbelievable, it's not their money.

Thems the rules. But really not worth getting too hung about - unless you have a shed load you want to take out of a non-pension account.

 

[Pushka]

Ask the Expert: Ways to minimise tax paid on super inheritance - News | InDaily, Inside South Australia

If you suffer serious ill health, you can withdraw super funds at any time to ensure super tax does not have to be paid by your beneficiaries.

www.indailysa.com.au

if this is not done
here are the taxing rules

Paying superannuation death benefits | Australian Taxation Office

Payment made to a person or trustee of a deceased estate after the member had died.

www.ato.gov.au

The first question asked could have been me.

So, I'm being thick. I take money out of which account (pension or super) and put it back into which account? (Pension or super, although I don't think I can do the former). Well under the caps. And where in the tax app do I find info about how much has been contributed post tax?

 

[openseat]

Thems the rules. But really not worth getting too hung about - unless you have a shed load you want to take out of a non-pension account.

Its about estate planning for non-dependents. Yes, there is a way out, but it will take some time and trouble. It is interesting that self-funded retirees are punished by taxes at all turns, despite having being productive members of society, built businesses, employed people, and having paid all sorts of taxes.

 

[SYD]

W

It’s about estate planning for non-dependents. Yes, there is a way out, but it will take some time and trouble. It is interesting that self-funded retirees are punished by taxes at all turns, despite having being productive members of society, built businesses, employed people, and having paid all sorts of taxes.

Out of curiosity, what sort of percentage of super is Taxable for you?

I’m not an accountant nor a tax lawyer, but unless I’ve stuffed up completely, anyone who’s only ever had SGL contributions into super has a 100% taxable component due to the concession going in. Those of us who are or will be comfortably “self funded” probably have topped up along the way as non-taxable contributions.

Some former business owners and down sizers get a one off chance to tip the scales.

 

[andye]

W

Out of curiosity, what sort of percentage of super is Taxable for you?

I’m not an accountant nor a tax lawyer, but unless I’ve stuffed up completely, anyone who’s only ever had SGL contributions into super has a 100% taxable component due to the concession going in. Those of us who are or will be comfortably “self funded” probably have topped up along the way as non-taxable contributions.

Some former business owners and down sizers get a one off chance to tip the scales.

My understanding is that concessional contributions + growth is classified as non-taxable. Its only non-concessional contributions (i.e money that has already been taxed at marginal rates) that is classified as non-taxable

 

[andye]

Its about estate planning for non-dependents. Yes, there is a way out, but it will take some time and trouble. It is interesting that self-funded retirees are punished by taxes at all turns, despite having being productive members of society, built businesses, employed people, and having paid all sorts of taxes.

Respectfully disagree.

You can be a self-funded retiree for 30+ years, enjoy the health services, security and infrastructure etc of the state for really very little tax.

The money invested in super is taxed concessionally. The growth (which is a result of your investments not toil) is taxed favourably in accumulation and not at all in pension mode

You may have paid your taxes while you were working but the deal for most self-funded retirees is very generous in Australia.