Amounts which are not classified as income are split into 3 categories.
Exempt income
This is income that you do not pay tax on, although, some exempt income may be taken into account when determining:
Tax losses of earlier income years that you can deduct
Adjusted taxable income of dependants
Some examples include certain Government pensions, certain Government allowances, certain overseas pay, some scholarships, etc.
Non-assessable, non-exempt income
This is also income that you don’t pay tax on – it does not affect your tax losses.
Some examples include the tax-free component of an employment termination payment (ETP), genuine redundancy payments, super co-contributions, etc.
Other amounts
There are also other amounts that are not taxable.
Some examples include: Rewards or gifts received on special occasions, prizes won in ordinary lotteries, child support and spouse maintenance payments, etc.
The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.
At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million.
Exceeding the personal transfer balance cap means that you have to:
Commute the excess from one or more retirement phase income streams.
Pay tax on the notional earnings related to that excess
The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’.
The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams.
