How to take advantage of the increased Transfer Balance Cap

In this guide

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

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.

For more on the TBC, see SuperGuide article Transfer balance cap (TBC) for super pensions: How it works.

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 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.

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.

Case study 1: Andrew

Andrew turned 60 on 1 March 2025. 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 $2.1 million (in accumulation phase). If he commenced an account-based pension on 1 March 2025, he could have transferred a maximum of $1.9 million to retirement phase. The remaining $200,000 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 2025 to commence an account-based pension with $2 million. This means that earnings on the $100,000 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 2025), he used assets outside super.

Good to know: Even with a lower super balance, commencing an account-based pension on or after 1 July 2025 may prove beneficial as it will give a TBC buffer of $100,000. This can be utilised in future if you make a downsizer contribution or a non-concessional contribution that you plan to convert to a retirement income stream.

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.

Case study 2: Rita

Rita commenced an account-based pension of $1.7 million on 1 July 2024. She intends to make a downsizer contribution of $300,000 because she heard about the TBC increasing to $2 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 2025.

However, because she already had an account-based pension prior the indexation, her cap will not increase to $2 million to make space for this additional contribution. She is only entitled to proportional indexation.

Rita’s transfer balance cap on the date she first had the highest value in her transfer balance account was $1.9 million. Her unused cap is calculated:

$1.7m/$1.9m x 100 = 89.47

Round down to 89.

100 – 89 = 11% unused cap percentage

Rita is therefore entitled to 11% of the $100,000 indexation increment, or $11,000.

So, Rita’s new TBC is $1,911,000 ($1,900,000 + $11,000) from 1 July 2025. This means she can only transfer $211,000 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 $11,000 more than she could prior to 1 July.

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.

Total super balance on 30 June 2024	Total super balance on 30 June 2025	Available contribution amount and bring-forward period in following year
Below $1.66m	Below $1.76m	3 years of caps ($120,000 x 3 = $360,000) 3 years bring-forward period
From $1.66 to less than $1.78m	From $1.76m to less than $1.88m	2 years of caps ($120,000 x 2 = $240,000) 2 years bring-forward period
$1.78m to less than $1.9m	$1.88m to less than $2m	1 year of caps ($120,000 x 1 = $120,000) No bring forward, general non-concessional contributions cap applies
$1.9m or more	$2m or more	Nil

Case study 3: Harvey

Harvey had a total super balance of $1.91m on 30 June 2024 and as a result was not eligible to make non-concessional contributions in 2024-25 because his total super balance on the prior 30 June was above the general transfer balance cap for that year.

On 30 June 2025, Harvey’s TSB was $1.98 million. Harvey is able to contribute up to $120,000 non-concessionally in 2025-26.

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.

About the author

Aakash Mehta

Aakash Mehta is a financial adviser and has been working in the financial planning profession for more than 7 years. He has an undergraduate degree in commerce, a post-graduate degree in international finance and a diploma in financial planning. His day-to-day work exposes him to real life financial planning issues around superannuation, retirement, insurance and estate planning, and he contributes to SuperGuide by writing case studies and articles on various financial planning strategies.

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