good news for Retirees - TBC Set to Rise to $1.9 Million

Inflation has risen to over 7% which is not good news for the average Aussie trying to afford their daily living expenses. However,one unexpected outcome from all of this is that retirees, who were considering retiring soon, could benefit from delaying setting up their retirementbased income streams.

Retirement

By Warren Strybosch

With the higher levels of inflation, the general transfer balance cap (TBC) will increase to $1.9 million from its current $1.7 million. This provides a great opportunity for those about to retire who have more than $1.7 million in their superannuation funds.

The Australian Bureau of Statistics, at the end of January, released its latest inflation figures showing a consumer price index (CPI) of 7.8 per cent for the December quarter 2022, which is high enough to result in a double indexation of $200,000 and raising of the general TBC to $1.9 million from 1 July 2023 (abs.gov.au).

Colonial First State head of technical services Craig Day, in a response to the SelfManagedSuper Magazine, said the increase was based on a calculation involving inflation and the initial TBC of $1.6 million.

“The way we index the TBC is to base it on the December quarter CPI figure of the prior year and at 30 June this year that will be the figure for December 2022,” Day said.

“We then divide that by the December quarter figure for 2016, used in 2017 when the TBC was introduced, and multiply by $1.6 million and round that to the nearest $100,000 for the level of indexation, which will be rounded down from $1,902,400.”

Whilst many retirees will not have anything close to $1.7 million in their superannuation and won’t be able to take advantage of the increased TBC, we are starting to see more and more clients reaching this figure who might win from this increase. Due to the significant increase in property prices over the last decade, many retirees are opting to sell one of more of their investment properties and place these proceeds into super as they approach retirement. We are also seeing an increase in intergenerational wealth. Many accumulators are going to receive large windfalls over the next ten or so years. It is likely some of this windfall will end up in the super as well. It will be these people who will benefit from the increased tax-free pension income.

For those who have not yet commenced a retirement-phase income stream before 1 July 2023 will enjoy the full benefit of a $200,000 increase to the TBC, whereas those who have already fully utilised their TBC before this date will not receive any personal benefit from the upcoming increase to the general TBC.

For those people who have already set up a transition-to-retirement income stream pension (TTR), will need to consider whether to turn it off before 1 July or shift it back into accumulation phase – roll the money out of pension and back into superannuation. If they turn 65 after the 1st July 2023 and are still in TTR phase, the TBC will be $1.7 million, but if it is turned off and started later as an account-based pension, they will be able to have a $1.9 million TBC. It is advisable that those nearing retirement who currently have a TTR set up with a combined super and pension balance over $1.7 million, to seek advice regarding there TTR and whether it is beneficial or not to close the TTR down.

Retirement planning can be complex. At Find Retirement, we help clients transition from work to retirement with ease. If you are nearing retirement, then consider making an appointment with an award-winning financial advisor at Find Retirement.

Warren Strybosch Award winning Financial Adviser and Accountant

Part of the Find Group of companies Ph 1300 88 38 30 email: warren@findretirement.com.au

Financial Planning is offered via Find Wealth Pty Ltd ACN 140 585 075 t/a Find Wealth & Find Retirement.

Find Wealth is a Corporate Authorised Representative (No 468091) of Alliance Wealth Pty Ltd ABN 93 161 647 007 (AFSL No. 449221). Part of the Centrepoint Alliance group https://www.centrepointalliance. com.au/

Warren Strybosch is Authorised representative (No. 236815) of Alliance Wealth Pty Ltd.

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