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TBAR – indexation

The Transfer Balance Cap will be indexed, with annual increases in increments of $100,000 in line with the Consumer Price Index.

If a Superannuation Fund member who has not fully utilised the TBC wishes to increase their account balance after an indexation increase, the increased cap will be calculated proportionally. The member can commence another income stream with an amount calculated via the formula:

NewAccountStartCap  = Unused Cap Balance + ((1 – (Commencement balance/Cap at commencement)) x Indexation Increase)

Example:

A pensioner commences a pension in FY2018 with $1 million. This pensioner has used 0.625 of their $1.6 million TBC ($1,000,000/$1,600,000).

They have an Unused Cap Balance of $600,000 (0.375).

If the Cap is increased by $100,000 (6.25%) in FY2020, that pensioner may commence a new income stream with a starting amount of $637,500, being the Unused Cap Balance of $600,000, PLUS 0.375 of the cap increase ($37,500).

[Calculation:  Commencement Balance $1,000,000 / Cap at commencement $1,600,000 = 0.625

1 – 0.625 = 0.375

0.375 x Indexation Increase ($100,000) = $37,500

Unused Cap Balance = $600,000 + $37,500 = $637,500]