When it comes to accumulating wealth inside of super, it’s important to keep track of your total super balance (TSB).

This is pertinent from not only a financial situation, goals and objectives perspective, but also the fact that your TSB can impact your capacity to use several wealth accumulation strategies.

Your total super balance (TSB) and wealth accumulation strategies

An overview of your TSB

In broad terms, your TSB for a financial year is the sum of, at 30 June of the previous financial year:

• the value of your accumulation (inclusive of pre-retirement, or transition phase) and retirement phase super interests*,

          *This may also include the value of certain limited recourse borrowing arrangements (LRBAs).

• the amount of any roll-over super benefit (‘in-transit’) not reflected in the accumulation and retirement phase value of your super interests.

Reduced by any structured settlement (or personal injury compensation) contributions paid into your super fund.

In contrast, as there can be confusion between the two, your transfer balance cap is the limit on the super benefits that can be transferred to retirement (pension) phase; currently $1.6 million (indexed) per person.

An overview of wealth accumulation strategies

There is a range of wealth accumulation strategies available to you in the super environment. Whilst each is uniquely different, they do share a common thread/aim: to help facilitate wealth accumulation in your working years, and subsequent income-generation in your retirement years.

Ultimately, their appropriateness will be largely dependent upon your personal circumstances (financial situation, goals and objectives). Here is an example of one such wealth accumulation strategy:

• The carry forward provision.
  • Personal circumstances. You work casual or part-time, take time out of work (e.g. raising a family), or have ‘lumpy’ income (e.g. a small business owner). This means that there can be periods where no or limited super contributions are made to your super account, which has had flow-on effects regarding your super balance.
  • Wealth accumulation strategy. You have the opportunity to ‘catch-up’ concessional contributions, if you have the capacity and wish to do so. This means that, subject to meeting the relevant eligibility requirements, you are able to carry forward unused concessional contributions cap amounts on a rolling basis for a period of up to five years.

With the above in mind, it’s important to understand that your (and, your spouse’s) TSB can impact your capacity to use several wealth accumulation strategies, now and into the future. Here are some examples:

• The carry forward provision.
  • TSB impact. Part of the eligibility criteria for this strategy includes the fact that you must have a TSB less than $500,000 on 30 June of the previous financial year.
  • More information. Please watch our animation, ‘The Carry Forward Provision’, for a more detailed overview of this strategy.

• Non-concessional contributions and the bring-forward rule.
  • TSB impact. Part of the eligibility criteria for this strategy includes the fact that you must have a TSB less than $1.6 million on 30 June of the previous financial year for non-concessional contributions, and the bring-forward rule phases out from $1.4 million.
  • More information. Please read our learning module section, ‘The Non-Concessional Contributions Cap’, for a more detailed overview of this strategy.

• The work test exemption (WTE).
  • TSB impact. Part of the eligibility criteria for this strategy includes the fact that you must have a TSB less than $300,000 on 30 June of the previous financial year.
  • More information. Please watch our animation, ‘The Work Test Exemption (WTE)’, for a more detailed overview of this strategy.

• The Government co-contribution.
  • TSB impact. Part of the eligibility criteria for this strategy includes the fact that you must have a TSB less than $1.6 million on 30 June of the previous financial year.
  • More information. Please read our learning module section, ‘The Government Co-Contribution’, for a more detailed overview of this strategy.

• The spouse tax offset.
  • TSB impact. Part of the eligibility criteria for this strategy includes the fact that your spouse must have a TSB less than $1.6 million on 30 June of the previous financial year.
  • More information. Please read our learning module section, ‘Spouse Contribution’, for a more detailed overview of this strategy.

Moving forward

Super will undoubtedly play an integral part in your financial lifecycle journey. Moving from financial dependence to independence, in terms of wealth accumulation and income-generation.

There is a range of wealth accumulation strategies available to help in this regard – over and above the compulsory super guarantee contributions that you will most likely receive over your lifetime.

However, as you have seen from the examples above, your (and, your spouse’s) TSB can impact your eligibility for several wealth accumulation strategies, now and into the future. Please consider this before making a contribution to super.

If you have any questions regarding this article, please do not hesitate to contact us.