What is the Transfer Balance Cap?

The transfer balance cap limits the amount of superannuation you can move into a retirement income stream (known as pension phase).

Starting from 1 July 2025, the general transfer balance cap will increase from $1.9m to $2m, allowing further tax benefits for superannuation fund members.

The general transfer balance cap represents the maximum amount of superannuation that can be transferred into retirement phase, where earnings on these funds are tax-free. The cap rises in $100,000 increments based on movements in latest Consumer Price Index (CPI) figures (most recently released on 29 January 2025).

For those who begin their retirement phase income stream in the 2025-26 financial year, their personal transfer balance cap will be set at $2m. However, those who have already started a retirement phase income stream before this date may be eligible for a proportional increase in their cap. This adjustment ensures the superannuation system keeps in line with inflation, and retirees maintain their purchasing power over time.

The increase in the transfer balance cap also affects several other superannuation thresholds such as eligibility to make contributions, receive co-contributions and tax offsets.  

For instance, a member’s total superannuation balance, which determines eligibility to make non-concessional contributions is directly linked to the transfer balance cap. As the cap increases, individuals can potentially contribute more to their superannuation and access additional benefits and thereby better prepare for retirement.

If you exceed the cap, you are liable to pay tax on the excess transfer balance earnings (excess transfer balance tax). You also need to transfer any excess to a super accumulation account or withdraw it as a lump sum.

What if my account grows in value due to investment performance?

In the event your pension balance grows over time due to investment performance, you are able to maintain this balance in pension phase  (and earnings are still tax free) this does not affect your transfer balance account.

What is a Transfer Balance Account?

A transfer balance account is a record of all the events that count towards your transfer balance cap and is kept by the ATO. If you have more than one super pension account, the amounts you used to commence each one (or the ‘special value’ of the income stream if it is a capped defined benefit) will all be recorded and added together in your transfer balance account report (TBAR) with the ATO. This account remains active until your death, and you can access your TBAR at the ATO via your myGov account.

Seeking advice can help you to maximise the amount of superannuation you can have in tax free phase.  Strategic planning can assist other areas such as future windfalls from inheritance or sale of assets or to optimise your own estate planning.

General Advice Warning - This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial or tax adviser before making any investment decisions.