Now is a great time to get on the front foot with what’s in store for advice strategy in the year ahead, and to add some key dates to your diary for 2024 before you wrap for the holidays.

January: Will super caps index?

The consumer price index (CPI) and average weekly ordinary time earnings (AWOTE) figures will be released in January and February, respectively. This will determine whether the general transfer balance cap (TBC), contributions caps and related total super balance (TSB) thresholds will change from 1 July 2024. While any resulting impact may seem a way off, there may be important considerations for contribution and retirement advice provided this side of 30 June.

With the rate of inflation easing, it’s looking somewhat unlikely that we will see the general TBC index to $2 million from 1 July. That said – keep an eye on this, as if we do see indexation of the cap to $2 million, this could impact advice early in the new year.

For example, you’ll need to think about whether it’s best to commence a retirement phase pension before or after 1 July – is it worth hanging back to pick up the indexation and a higher personal TBC? What’s the cost of doing so? It is important to understand the impact of pension refreshes on any indexation of the client’s personal cap performed before or after this date.

Also, review clients who have high balance transition to retirement income streams who may meet a full condition of release before the end of the financial year. A transition to retirement (TTR) pension enters retirement phase automatically when a person reaches 65 or notifies the super fund they’ve met certain other full conditions of release.

These arrangements may need to be reviewed and either commute part or all of their pension balance back to accumulation to avoid an excess transfer balance amount, or to maximise their personal TBC by ensuring they enter retirement phase once the higher TBC comes into play.

February: Contribution caps

Recent increases to AWOTE make a possible increase to contribution caps look more likely. This could mean the concessional and non-concessional caps (NCC) increase to $30,000 and $120,000 respectively.

Keep in mind that the general TBC is used to determine the TSB thresholds that determine the non-concessional limits for high balance clients, including under the bring-forward rule. Therefore, an increase to either the contribution caps or the general TBC will impact non-concessional contribution eligibility in the new financial year. The table below summarises the potential limits from 1 July based depending on indexation. As the table demonstrates, indexation of the general TBC will increase contribution opportunities for high balance clients. However, if contribution caps increase but the general TBC remains at $1.9 million, contribution eligibility from 1 July will actually decrease slightly.