I need to restructure my super because of the new retirement transfer cap. What are the implications for this?

Since 1 July 2017, a new transfer balance cap of $1.6 million applies. This means a member can transfer up to $1.6 million from the accumulation phase of superannuation to support their retirement income streams.

This reform is designed to limit the amount of benefits a member can transfer to the tax-free retirement phase.

Broadly, the balance of existing retirement phase account-based income streams at 30 June 2017 as well as the initial value of new account based income streams commenced after 1 July 2017, will be measured against an individual’s personal transfer balance cap. Any amounts over the cap will need to be rolled back to accumulation phase or withdrawn from the superannuation system. For defined benefit pensions the rules are different again, with a cap determined by a multiple of 16 of the annual income received. Read more about the changes to defined benefit pensions.

The tricky aspect of this decision is that once you withdraw the money from super there may be very limited capacity, if any at all, to get the money back into super (depending on your age, this could be an irreversible decision). If you do withdraw it, you then need to consider how best to invest or use the money outside of super.

To assess whether you will be better off having these excess assets in super or outside super one aspect you would consider is tax. Within super, earnings will be concessionally taxed at up to 15% whereas outside of super, earnings will be taxed at your marginal tax rate (inclusive of the tax-free threshold).

If you are affected by this reform, consider your own individual circumstances to determine the best course of action. If in doubt, seek financial advice.

Read more about the general transfer balance cap.

The information contained in these responses are not legal, taxation or accounting advice. It is intended to provide general information only. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any investment decisions, you should speak with a financial adviser to consider whether this information is appropriate for your needs, objectives and circumstances. You should also obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed. This case study was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is also the administrator of, and wholly owned by, the UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Limited (ABN 54 006 027 121) is the trustee of the fund. UniSuper Advice is operated by UniSuper Management Pty Ltd, which is licensed to provide financial product advice to members.

Answered by Judy Lu


Judy has worked in the financial services industry since 1999 and has been providing financial advice since 2002.

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