How to take advantage of the increased Transfer Balance Cap (including calculator)

On this page

Remind me, what is the TBC?
How does indexation work?
Other opportunities arising from indexation

The Transfer Balance Cap (TBC) increased with indexation from $1.7 million to $1.9 million on 1 July 2023. 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.

The cap started at $1.6 million on 1 July 2017 before rising to $1.7 million on 1 July 2021.

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.

For more on the TBC, see SuperGuide article Definitive Guide to the Transfer Balance Cap.

Good to know: When you start your first pension account, the ATO establishes a Transfer Balance Account (TBA) to track your TBC. Your TBA is a record of all the ins and outs (credits and debits) that count towards your TBC.

How does indexation work?

Indexation results in 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.

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 2023 with $1.7 million, indexation will not be applied.

2. Anyone starting a retirement income stream for the first time on or after 1 July 2023 will have a personal TBC of $1.9 million.

Case study 1: Andrew

Andrew turned 60 on 1 March 2023. He planned to fully retire on his birthday and commence an account-based pension to withdraw tax-free income to support his living expenses.

His super balance was $2 million (in accumulation phase). If he commenced an account-based pension on 1 March 2023, he could have transferred a maximum of $1.7 million to retirement phase. The remaining $300,000 would have remained in accumulation phase where investment earnings would be taxed at up to 15% or could have been cashed as a lump sum and invested outside super, where earnings are taxed at marginal rates.

Andrew took advice and decided to wait until 1 July 2023 to commence an account-based pension with $1.9 million. This means that earnings on the $200,000 that would otherwise have remained in the accumulation phase or been invested outside super are now tax free. To fund his living expenses for three months (March to June 2023), he withdrew tax-free lump sums from his accumulation account as he had met a condition of release (retired after age 60).

Good to know: Even with a lower super balance, commencing an account-based pension on or after 1 July 2023 may prove beneficial as it will give a TBC buffer of $200,000. This can be utilised in future if you make a downsizer contribution or a non-concessional contribution (depending on eligibility).

3. Pensioners who commenced an income stream prior to 1 July 2023 and have not fully utilised their TBC will receive a proportionate increase their personal TBC (but not the full $200,000 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 the TBC at the earliest date of this highest value.

Hence, the increase in your TBC = unused cap percentage x $200,000 (the increase in the TBC due to indexation). The following example illustrates how this applies in real life.

Case study 2: Rita

Rita commenced an account-based pension of $1.6 million on 1 July 2022. She intends to make a downsizer contribution of $300,000 because she heard about the TBC increasing to $1.9 million and is selling her home. Rita assumes she will be able to use the full additional contribution to commence a further income stream after 1 July 2023.

However, because she already had an account-based pension prior the indexation, her cap will not increase to $1.9 million to make space for this additional contribution. She is only entitled to proportional indexation.

The transfer balance cap at the time Rita first had her highest transfer balance was $1.7 million. Her unused cap is calculated:

$1.6m/$1.7m x 100 = 94.11

Round down to 94.

100 – 94 = 6% unused cap percentage

Rita is therefore entitled to 6% of the $200,000 indexation increment, or $12,000.

So, Rita’s new TBC is $1,712,000 ($1,700,000 + $12,000) from 1 July 2023. This means she can only transfer $112,000 more into retirement phase – her new cap less the amount she has already used to commence a pension. Rita cannot transfer the full $300,000 she planned to a pension without exceeding the cap.

Waiting until after 1 July to transfer more into the retirement phase will mean Rita can transfer $12,000 more than she could prior to 1 July.

If you have already started an account-based super pension, SuperGuide has created a calculator (below) to help you work out your new TBC from 1 July 2023.

Enter the highest ever balance of your TBA, your TBC on the first day of that highest balance, and your current personal TBC in whole dollars without commas. You may need to log in to ATO online services via myGov or call the ATO superannuation hotline on 13 10 20 to find these figures.

Disclaimer: This calculator is designed to provide an estimate of your new TBC. For help in calculating your new TBC and in deciding how to take advantage of any increase, we recommend you seek independent financial advice tailored to your personal needs, objectives and financial circumstances. Your exact personal TBC is available via your myGov account shortly after 1 July. If you have an SMSF and your transfer balance account reporting is not up to date the new figure may take longer to become available.

You can track your TBC-related information through your myGov account.

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 2023–24 if your total super balance is below $1.9 million on 30 June 2022.

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 2023–24.

The table shows the bring-forward rules that apply in 2022–23 versus 2023–24.

Total super balance on 30 June 2022	Total super balance on 30 June 2023	Available contribution amount and bring-forward period in following year
Below $1.48m	Below $1.68m	3 years of caps ($110,000 x 3 = $330,000) 3 years bring-forward period
From $1.48 to less than $1.59m	From $1.68m to less than $1.79m	2 years of caps ($110,000 x 2 = $220,000) 2 years bring-forward period
$1.59m to less than $1.7m	$1.79m to less than $1.9m	1 year of caps ($110,000 x 1 = $110,000) No bring forward, general non-concessional contributions cap applies
$1.7m or more	$1.9m or more	Nil

Case study 3: Harvey

Harvey had a total super balance of $1.71m on 30 June 2022 and as a result was not eligible to make non-concessional contributions in 2022–23.

On 30 June 2023, Harvey’s TSB was $1.78 million. Harvey is able to contribute up to $220,000 in 2023–24 using a two-year bring forward period.

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 on 30 June of the prior financial year.