How to take advantage of the increased Transfer Balance Cap

The Transfer Balance Cap (TBC) will be increased with indexation from $1.9 million to $2 million on 1 July 2025. Indexation will continue to increase the cap in $100,000 increments in future. If indexation increases the cap, the new amount takes effect on 1 July of the new financial year.

Indexation creates opportunities for some current retirees to increase the amount in their tax-free account-based superannuation pension. For those who are on the cusp of retirement, it may be worth delaying a super pension until after indexation takes effect.

Remind me, what is the TBC?

In a nutshell, your TBC is the maximum amount you can transfer to a tax-free pension account.

How does indexation work?

Indexation has the following implications:

1. Individuals who have already used their whole transfer balance cap at any time in the past are not entitled to an indexation increase. 

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So, if you commenced an account-based pension on 1 July 2019 with $1.6 million (when the cap was $1.6 million), the indexation increase does not apply to you. Similarly, if you commence a pension in June 2025 with $1.9 million, indexation will not be applied.

2. Anyone starting a retirement income stream for the first time on or after 1 July 2025 will have a personal TBC of $2 million.

3. Pensioners who commenced an income stream prior to 1 July 2025 and have not fully utilised their TBC will receive a proportionate increase their personal TBC (but not the full $100,000 indexation). In such a case, a pensioner’s ‘unused cap percentage’ of their TBC will be used to proportionately apply indexation.

Unused cap percentage is calculated by subtracting your used cap percentage from 100, where your used cap percentage is calculated as follows:

(used cap/TBC x 100) rounded down to the nearest whole number

The used cap is the highest ever value in your TBA, and TBC is your TBC at the earliest date of this highest value.

Hence, the increase in your TBC = unused cap percentage x $100,000 (the increase in the TBC due to indexation). The following example illustrates how this applies in real life.

You can track your TBC-related information through your myGov account, where you can see your transfer balance account and your current transfer balance cap. If you have already started a retirement income stream, your new (indexed) TBC will be published shortly after 1 July.

Other opportunities arising from indexation

Because the general transfer balance cap figure is also used to determine eligibility for other super measures, its indexation offers opportunities for those with a high super balance.

1. Non-concessional contributions and the co-contribution

To be eligible to make non-concessional contributions and to receive a co-contribution in a financial year, your total super balance on the prior 30 June must be below the general transfer balance cap.

Even if your personal transfer balance cap is lower, you are able to make non-concessional contributions in 2025-26 if your total super balance is below $2 million on 30 June 2025.

2. Bring forward

Bring-forward rules for non-concessional contributions are modified when your total super balance is close to the general transfer balance cap. Indexation of the cap could significantly increase the amount of non-concessional contribution a person can make in 2025–26.

The table shows the bring-forward rules that apply in 2025-26 versus 2024-25. 

3. Spouse contributions

The level of the transfer balance cap also determines a person’s eligibility to receive super contributions from their spouse, and consequently for the contributing spouse to receive a spouse tax offset.

To be eligible for these measures, the spouse receiving the contribution must have a total super balance below the general transfer balance cap for the financial year the contribution is being made on 30 June of the prior financial year.