As of the 2025–26 financial year, the general Transfer Balance Cap is $2.0 million. But what does that actually mean?
Let’s break it down clearly.
What Is the Transfer Balance Cap?
The Transfer Balance Cap limits how much superannuation you can move from accumulation phase into retirement phase (also known as pension phase), where investment earnings are tax-free.
From 1 July 2025, the general cap is $2.0 million. This means you can transfer up to $2.0 million into one or more retirement phase income streams, such as an account-based pension.
Any amount above that must remain in accumulation phase, where earnings continue to be taxed at 15%.
Importantly, this does not mean you are limited to having $2.0 million in super. You can have more than this amount — you just cannot transfer more than your personal cap into the tax-free retirement phase.
Your Personal Cap May Be Different
One of the most misunderstood aspects of the Transfer Balance Cap is that it is personal, not universal.
If you start your first retirement phase pension on or after 1 July 2025, your personal cap will be $2.0 million.
However, if you commenced a pension in earlier years (for example when the cap was $1.6m, $1.7m or $1.9m), your personal cap may be lower and increased only proportionally through indexation.
In other words, not everyone automatically “gets” the full $2.0 million cap. It depends on your pension commencement history.
Why the Cap Matters
For retirees with substantial super balances, the difference between pension phase and accumulation phase can have meaningful tax consequences.
Consider a retiree with $2.8 million in super:
- $2.0 million can move into pension phase (tax-free earnings).
- The remaining $800,000 stays in accumulation phase (earnings taxed at 15%).
Over time, that 15% tax on earnings reduces compounding compared to funds held in pension phase.
For higher net worth retirees, structuring around the cap becomes critical for long-term tax efficiency.
Earnings Do Not Count Toward the Cap
Another key clarification: investment growth inside pension phase does not count toward breaching the cap.
If you transfer $2.0 million into pension phase and it grows to $2.3 million, you are not forced to move the excess back to accumulation. The cap measures the amount transferred, not the ongoing balance.
Breaches only occur if you transfer more than your available cap amount.
Couples and the Cap
The Transfer Balance Cap applies individually. This means couples can potentially have a combined $4.0 million in pension phase (assuming both have the full $2.0m cap available).
This is why equalising super balances between spouses during working years can create significant advantages later in retirement.
Without planning, one spouse may hit the cap while the other has unused capacity.
Future Indexation
The cap is indexed in line with CPI in $100,000 increments. Based on current projections, it is expected to increase to $2.1 million from 1 July 2026, although this will depend on official CPI indexation calculations.
Superannuation legislation evolves regularly, which makes ongoing review essential.
Strategic Planning Around the Transfer Balance Cap
The Transfer Balance Cap influences several important decisions, including:
- When to commence an account-based pension
- Whether to partially commute pensions
- Contribution timing
- Spouse equalisation strategies
- Estate planning structuring
For high-net-worth retirees and aspirational accumulators, small adjustments in structuring can result in substantial long-term tax savings.
The key takeaway is this: the Transfer Balance Cap is not simply a limit — it is a strategic planning lever. When understood and managed correctly, it allows retirees to maximise tax-free income while staying compliant.
If you are approaching retirement or already have a pension in place, it is worth reviewing your personal cap position to ensure your strategy is optimised.
Disclaimer: This information is general in nature and does not consider your personal objectives, financial situation or needs. You should consider seeking professional advice before making any financial decisions. Past performance is not a reliable indicator of future performance.
