The Transfer Balance Cap (TBC) is a limit on how much you can transfer from the accumulation phase into the tax-free retirement (pension) phase of super. In FY2025–26, the general TBC is $2.0 million. Any amount above this cap cannot be moved into pension phase — it must remain in accumulation (where earnings are taxed at 15%) or be withdrawn.
The TBC was introduced on 1 July 2017 to limit the amount of super that can benefit from the completely tax-free treatment of retirement phase earnings.
The General Transfer Balance Cap
| Financial Year | General Transfer Balance Cap |
|---|---|
| 2017–18 to 2019–20 | $1.6 million |
| 2020–21 | $1.6 million |
| 2021–22 | $1.7 million (first indexation) |
| 2022–23 | $1.7 million |
| 2023–24 | $1.9 million |
| 2024–25 | $1.9 million |
| 2025–26 | $2.0 million |
The cap is indexed in $100,000 increments based on the Consumer Price Index (CPI), rounded down. Indexation is applied when cumulative CPI movement since the last adjustment reaches a full $100,000 increment. Source: ATO.
Your Personal Transfer Balance Cap
Every individual has their own Personal Transfer Balance Cap (PTBC). The PTBC starts at the general TBC that applied when you first moved into retirement phase (i.e. started a retirement phase pension). Your PTBC is then indexed — but only proportionally based on how much of your original cap was unused.
How personal cap indexation works:
If you used your full cap when you entered retirement phase, your PTBC does not increase with indexation — you have no unused cap space to index.
If you only used a portion of your cap at the time, the unused proportion is eligible for indexation.
Example:
- Peter started a $1.0M retirement phase pension in FY2021–22 when the general cap was $1.7M
- He used $1.0M of $1.7M — 58.8% used, 41.2% unused
- His personal cap may be indexed on that 41.2% unused portion as the general cap increases
Tracking your PTBC precisely requires reviewing your Transfer Balance Account (TBA) — which the ATO maintains and you can view via myGov.
What Counts Toward the Transfer Balance Cap?
The TBC counts the credits to your Transfer Balance Account:
| What Creates a Credit (Counts Toward Cap) | What Creates a Debit (Reduces Cap Usage) |
|---|---|
| Starting a retirement phase income stream (account-based pension) | Commuting (ending) a pension |
| Starting a defined benefit pension | Excess transfer balance returned to accumulation |
| Receiving a death benefit pension | |
| Receiving a structured settlement contribution |
What does NOT count toward the TBC:
- Lump sum withdrawals from super (not pension phase)
- Account-based pension investment earnings (growth/decline doesn’t affect the TBA credit)
- Transition to Retirement pensions (TTR is not retirement phase)
- Amounts remaining in accumulation phase
What Happens If You Exceed the Transfer Balance Cap?
If you transfer more than your personal cap into retirement phase, you have an excess transfer balance. The ATO will issue an excess transfer balance determination requiring you to commute (remove) the excess from retirement phase.
Excess Transfer Balance Tax:
Interest accrues on the excess amount at the shortfall interest rate from the day the excess occurred. The excess transfer balance tax rate in FY2025–26 is based on the Shortfall Interest Charge (SIC) rate — currently in the range of 9–12% per year (check ATO for the current rate). This is a tax penalty — it is intended to deter exceeding the cap.
You will not lose the excess super — it is commuted back to your accumulation account (or withdrawn) — but you pay the tax on the “benefit” of having had it in tax-free retirement phase.
Practical Implications — Who Needs to Think About This?
For most Australians with typical super balances, the TBC is not an immediate concern — the average retirement super balance in Australia is well under $1 million. However, the TBC becomes directly relevant if:
- Your total super balance is approaching or exceeding $2 million
- You are combining a large accumulation balance with an existing pension (death benefit pension, defined benefit, etc.)
- You and your partner each have large super balances and are structuring your retirement income
Super Balances Over $2 Million
If your total super balance exceeds $2 million at retirement:
- You can move $2.0M into retirement phase (tax-free earnings)
- The remainder must stay in accumulation (earnings taxed at 15%) or be withdrawn
- There is no limit on the accumulation balance — just on the tax-free retirement phase amount
The TBC and the Transfer Balance Account
The ATO maintains a Transfer Balance Account (TBA) for every member who has entered retirement phase. It tracks:
- Credits (when you start a pension)
- Debits (when you commute or partially withdraw from a pension)
You can view your TBA via myGov → ATO → Super. Your TBA shows the current balance and remaining cap space.
Defined Benefit Pensions and the TBC
Defined benefit pensions (common in public sector super funds) are counted toward the TBC using a special value calculation — the annual pension amount × 16. This formula can mean that a relatively modest annual defined benefit pension uses a significant portion of the cap.
Example: A public service defined benefit pension paying $80,000 per year counts as $80,000 × 16 = $1,280,000 toward the TBC — leaving only $720,000 of cap space for any other retirement phase accounts.
Frequently Asked Questions
What if my retirement phase account grows above $2M due to investment returns? The TBC applies to what you transfer into retirement phase — not to subsequent growth of the pension account. If you transferred $2.0M and it grows to $2.5M due to strong investment returns, that is not an excess. The cap is a credit cap, not a balance cap.
Can a couple each have up to $2M in retirement phase? Yes — the TBC applies per person, not per couple. A couple can each have $2.0M in retirement phase, for a combined $4.0M in completely tax-free super pension accounts.
I turned 60 in FY2021–22 and started an account-based pension — what is my personal TBC? If you started in FY2021–22 when the general cap was $1.7M and used the full cap, your PTBC remains $1.7M — there is no additional indexation if your cap was fully used. If you used less than the full cap, you may have indexed cap space. Check your TBA on myGov or contact your fund.
Can I add more to my retirement phase account after I’ve started a pension? No — once you have started an account-based pension, you cannot add to it by making contributions. New super contributions go into your accumulation account. To move additional accumulation savings into retirement phase, you would need to start a new pension account (subject to remaining TBC headroom).
See also: Super Strategies. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.