Overview
On 1st July 2023, the General Transfer Balance Cap indexation is set to increased by $200,000 to $1.9 million. The entitlement of each member to indexation of their Personal Transfer Balance Cap varies and mainly depends on the highest ever balance in the individual's Transfer Balance Account (TBA). This means individuals will have a Personal Transfer Balance Cap between $1.6 million and $1.9 million. This article aims to provide information about the changes in Class that support the indexation and scenarios to determine indexation entitlement as follows:
- Individuals who commence first-ever retirement phase income stream from 1st July 2023
- Individuals who met or exceeded their PTBC prior to 1st July 2023
- Individuals who's TBA are below their PTBC prior to 1st July 2023
Individuals who commence first-ever retirement phase income stream from 1st July 2023
Individuals who commence their first-ever retirement phase income stream from 1st July 2023 will be entitled for the full indexation and have a Personal Transfer Balance Cap of $1.9 million.
Individuals who met or exceeded their PTBC prior to 1st July 2023
Individuals who had a Transfer Balance Account that reached or exceeded their Personal Transfer Balance Cap before 1st July 2023, will not be entitled to any indexation. In other words, these individuals' Personal Transfer Balance Cap will remain the same as they have fully utilised their TBA.
Individuals who's TBA are below their PTBC prior to 1st July 2023
Individuals who have partially used up their available personal TBC prior to 1st July 2023 will be entitled to proportional indexation of their Personal Transfer Balance Cap. This can be worked out based on the individuals' highest ever transfer balance at the end of a day compared to their Personal Transfer Balance Cap on that day. The unused cap is expressed as a percentage, then multiply by $200,000 (the General Transfer Balance Cap increment) to calculate the proportional entitlement to indexation.
Proportional indexation calculation on 1st July 2023
An individual's Personal Transfer Balance Cap will be proportionally indexed if they had a Transfer Balance Account before indexation commenced and their Transfer balance Account did not reached or exceed their Personal Transfer Balance Cap.
The calculation of the proportional indexation is based on unused cap percentage multiply by the indexation of general transfer balance cap increment (i.e. $200,000).
The unused cap percentage can be derived through the following steps:
Step 1 : Identify the highest ever (credit) balance of the individuals transfer balance account at the end of any day from 30 June 2017 to 30 June 2023
Step 2 : Identify the earliest date in which step 1 occur
Step 3 : Divide the Highest Transfer Balance identified in step 1 by the individual's Personal Transfer Balance Cap on the day identified in step 2 as a percentage and round down to nearest whole number
Step 4 : Subtract the result of step 3 from 100%
Note: If the highest Transfer Balance mentioned in step 1 is nil or less than nil (debit balance), the unused cap percentage is taken to be 100% and will entitled full indexation.
Examples:
| Individuals | Alpha | Beta | Charlie | Delta | Echo | Foxtrot |
| Period 1: From 1/7/2017 to 30/6/2021 | ||||||
|
Highest ever TBA balance to 30/6/2021 (step 1) (step 3's numerator) |
$nil | $1.6mil | $400k | $400k | $nil | $400k |
|
Date of highest value (step 2) |
n/a | 1/7/2017 | 1/9/2018 | 1/4/2019 | n/a | 1/1/2021 |
| PTBC on that date (step 3's denominator) | $1.6mil | $1.6mil | $1.6mil | $1.6mil | $1.6mil | $1.6mil |
| Used PTBC in percentage (step 3) | 0% | 100% | 25% | 25% | 0% | 25% |
| Unused PTBC in percentage (step 4) |
100% |
0% |
75% |
75% |
100% |
75% |
| Proportional indexation on 1/7/2021 ($100k x step 4) |
$100k |
$nil |
$75k |
$75k |
$100k |
$75k |
| Indexed personal TBC on 1/7/2021 | $1.7mil | $1.6mil | $1.675mil | $1.675mil | $1.7mil | $1.675mil |
| Period 2: 1/7/2021 to 30/6/2023 | ||||||
|
Highest ever TBA balance to 30/6/2023 (step 1) (step 3's numerator) |
$1.7mil | $1.6mil | $1.675mil | $400k | $800k | $800k |
|
Date of highest value |
1/7/2021 | 1/7/2017 | 1/7/2022 | 1/4/2019 | 1/1/2023 | 1/4/2023 |
| Personal TBC on that date (step 3's denominator) | $1.7mil | $1.6mil | $1.675mil | $1.6mil | $1.7mil | $1.675mil |
| Used personal TBC in percentage (step 3) | 100% | 100% | 100% | 25% | 47% | 47% |
| Unused personal TBC in percentage (step 4) |
0% |
0% |
0% |
75% |
53% |
53% |
| Proportional indexation on 1/7/2023 ($200k x step 4) |
$nil |
$nil |
$nil |
$150k |
$106k |
$106k |
| Indexed personal TBC on 1/7/2023 | $1.7mil | $1.6mil | $1.675mil | $1.825mil | $1.806mil | $1.781mil |