Meg's Musings | August 2022

There are no encouraging financial statistics these days – rising interest rates and high inflation certainly don’t make happy reading for many who are already juggling cost of living challenges. And even our retiree clients probably aren’t benefiting enough from rising interest rates on their investments to offset increases in their costs.

Movement in the Consumer Price Index is also highly relevant for us in the superannuation world for other reasons. Remember it drives changes in some key thresholds – for example the transfer balance cap. And the transfer balance cap has implications well beyond just pensions – it sets the thresholds for non-concessional contributions too. Our high inflation rates have some curious flow on effects here.

At the moment, anyone with a total superannuation balance of at least $1.7m (the general transfer balance cap) has a non-concessional contributions cap of $nil. Unless CPI actually falls between June 2022 and December 2022, the cap will increase to $1.8m at 1 July 2023. (In other words, we’ve already locked in enough inflation for this threshold to be indexed and we still have two quarters to go!) In fact, if the CPI for the next two quarters is around the same level as it was for the June quarter (1.8%), the transfer balance cap might even skip this threshold and move straight to $1.9m. That would profoundly impact many clients’ ability to make non-concessional contributions.

All this gives us even more to think about as we plan our sessions for the Super Intensive Day. I hope you’ve already booked your spot but if you haven’t, now’s the time to lock it in. You can rest assured that we will have plenty of new ideas to share and for you to take back to your practice and use to help clients. It’s an event I look forward to every year, even more so this year as we’re running a live session (in Sydney only unfortunately) for the first time since 2019. While places are limited for the live event, I hope I’ll be able to see at least some of you there and others online.