Transfer Balance Cap indexation: Opportunities for SMSF members?

If you are approaching retirement and yet to commence a retirement phase income stream (pension), the indexation to the general TBC allows you to start one from 1 July 2026 with more of your accumulation balances. Essentially, an additional $100,000 into the tax-free pension environment.

For those already in retirement and accessing benefits by way of a pension, an increase to the TBC could allow you to move further amounts from your accumulation account into retirement phase, depending on your personal circumstances and how much of your personal TBC you have already used.

The additional amount that can be moved into retirement phase is calculated on a proportional basis, meaning that you may be eligible for partial indexation.

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For instance:

• If you have previously used 100% of your personal TBC, then you would not be eligible for any level of indexation.
• If you have previously used 50% of your personal TBC, then you would be eligible for 50% of the indexed amount; in this case, 50% of the $100,000 cap increase. You would therefore be entitled to move a further $50,000 into retirement phase.
• If you have not used any part of your personal TBC, then you would be entitled to all of the $100,000 indexed amount. When eligible, you could start a retirement phase pension with up to $2.1 million.

2. Make additional non-concessional contributions (NCCs)

Where your TSB on 30 June is less than the general TBC, it allows you to make use of certain super contribution opportunities in the following financial year. So a higher TBC post indexation would allow those with higher TSBs to make further contributions that were not previously allowed.

These opportunities include the eligibility to make further NCCs to your super fund, receive a government co-contribution, claim a tax offset for the contributions you make to your spouse’s super account and could even allow access to the three-year bring-forward rule for non-concessional contributions.

3. Rebalance member accounts

The ability to make further NCCs could also allow the rebalance and equalisation of spouse balances held in super.

This can be achieved by withdrawing an amount from one member’s balance and then recontributing these amounts into their spouse’s super account, where the balance can then be converted into a pension.

By doing this, both members of a couple can maximise the balances they hold in the tax-free retirement phase of super rather than being forced to hold accumulation balances that would be subject to tax on earnings.

If planned carefully, couples starting a super pension on or after 1 July 2026 can effectively share $4.2 million in tax-free pension balances.

Prior to the indexation of the TBC, you may not have been eligible to make further non-concessional contributions if your TSB exceeded the general TBC. The upcoming indexation may open up this strategic opportunity for you and/or your spouse.

Further opportunities for SMSF members

The TSB and TBC rules are not unique to SMSFs as they apply to most types of super funds in the same way, so the non-concessional contribution and pension opportunities mentioned earlier could benefit members of most super funds. However, there are other strategic opportunities that are unique to members of SMSFs.

Delay the sale of SMSF assets

Where SMSF trustees are considering the sale of a fund asset, it may be worth considering delaying that sale until after indexation of the cap, when the fund members could hold significantly higher balances in the tax-free retirement phase and significantly lower balances in the accumulation phase.

This could be effective in reducing any capital gains tax that may apply on the sale of the fund’s assets.

The example shows how this strategy operates now, but can be applied in the same way when the cap is indexed in future years.

In-specie contributions

For those approaching retirement, you could consider using the in-specie contribution rules that allow you to move certain assets, such as listed shares or commercial property you personally own, into your SMSF as a contribution.

With the effects of indexation flowing through to the rules around non-concessional contributions, you may now be eligible to use the three-year bring-forward rules from 1 July 2026, which could allow these larger assets to then be moved into your SMSF.