The submission explained that since the general transfer balance cap was first indexed in July 2021, individuals have been subject to a personal transfer balance cap which can range from $1.6 million to $1.7 million.

“A member’s personal TBC will equal the general TBC in the year they first have a retirement phase income stream counted against their transfer balance account,” it noted.

“However, post 1 July 2021, a member’s personal TBC may differ from the general TBC due to proportional indexation. Under proportional indexation, the unused portion of the member’s personal TBC (based on the highest percentage usage of their TBC) will be indexed in line with the indexation of the general TBC.”

Proportional indexation of the TBC is causing significant complexity and is compounded by a lack of access for advisers and SMSF administrators to the ATO reports needed to obtain an individual’s TBC.

The SMSF Association noted that following the indexation of the transfer balance cap to $1.9 million on 1 July 2023, the range of individual TBCs will expand significantly.

“Due to the complex nature of proportional indexation, it is inevitable that mistakes will be made leading to inadvertent breaches of the TBC,” it warned.

The associated stated that a simple way of addressing the complexities associated with proportional indexation would be to align all members TBC with the general TBC.

“This would provide certainty, reduce costs, and simplify the administration involved for the Australian Taxation Office, financial advisers, SMSF administrations and tax agents as well as the members themselves,” it explained.

“Indexing the TBC in this manner ensures that superannuation members in retirement are not disadvantaged by the impacts of inflation. Allowing members to retain more in the retirement phase, including on the death of a spouse.”

The submission said that the costs of allowing broad application of TBC indexation and the incremental loss of tax revenue would not be significant.

The SMSF Association also highlighted in its submission that the introduction of multiple TSB thresholds was unnecessarily adding to the complexity of the superannuation system.

“In addition to the number of thresholds, confusion, complexity and added costs arise because some of these thresholds are indexed and some are not, and those that are indexed are subject to different methods of indexation,” it said.

“The number of thresholds that apply have not only made it more difficult for superannuation members to understand and use the superannuation system, it has also made it more difficult for their advisers and superannuation fund administrators. It increases the professional services fees paid by superannuation members as they need specialised advice to understand the different layers of thresholds that may apply to them and when they apply.”

The submission proposed that the government remove the tiered TSB thresholds for bring-forward non-concessional contribution thresholds.

“We propose a single threshold, with NCCs, spousal and co-contributions aligned with the general TBC. Allowing the NCC three year bring forward to be applied where the member has a balance under the TSB threshold,” the submission stated.

The submission also called for the disregarded small fund assets threshold to be aligned with the general TBC.

Aligning the disregarded small funds assets cap with the general TBC, it said, would ensure consistency and alignment with the broader policy objectives with regards to the TBC and the operation of the disregarded small fund asset rules.