Tax-free Threshold Retirement Increases

 

Effective Date: 1 July 2025

Starting from 1 July 2025, the amount that can be transferred to a tax-free retirement account will increase to $2 million. This adjustment is due to the December 2024 inflation rate and is part of the annual indexing to the Consumer Price Index (CPI).

Key Points

• Increased Cap: The transfer balance cap, which is the maximum amount that can be transferred to a tax-free retirement account, will rise from $1.9 million to $2 million.
• Indexation: This increase is due to the CPI adjustment, which is reviewed and applied annually.
• Individual Caps: Each individual has a personal transfer balance cap. If you have already started a retirement income stream, the increase will only apply to your unused transfer balance cap.
• Timing Considerations: If you plan to start a retirement income stream, consider the timing. Starting in June 2025 means a cap of $1.9 million, while waiting until July 2025 allows for the new $2 million cap.

Benefits

• Maximise Tax-Free Retirement Savings: The increased cap allows for more funds to be transferred into a tax-free retirement account, potentially enhancing your retirement savings.
• Strategic Planning: This change provides an opportunity for strategic retirement planning, especially for those nearing retirement.

For further guidance on any of these areas, consider speaking to a tax professional to make sure you’re fully prepared.