Transfer Balance Cap Increase to $2M: What It Means and Why It Matters
3/6/25, 1:57 am
The Ark
From 1 July 2025, the Transfer Balance Cap (TBC) (the limit on how much you can transfer into a tax-free retirement (pension phase) superannuation account) will rise from $1.9 million to $2.0 million.
This long-anticipated increase is part of the government's CPI-linked indexation mechanism. However, its implications stretch far beyond a mere $100,000 increment. For high-net-worth individuals and SMSF trustees, this change presents a meaningful window to reassess retirement strategies and optimise tax outcomes.
What Is the Transfer Balance Cap?
The Transfer Balance Cap (TBC) governs how much you can move into a retirement-phase superannuation account, where investment earnings are tax-free. Any amounts above the cap must remain in the accumulation phase, where earnings are taxed at up to 15%.
💡 Strategic Implications
For High-Net-Worth Individuals:
The increase to $2.0M may appear modest, but in the context of compounding tax-free growth, this can represent substantial savings over time.
More assets, less tax: Every additional dollar you can shelter in a pension-phase account avoids the 15% tax on earnings that would otherwise apply in accumulation phase.
Review contribution plans: If you're under 75 and eligible, consider non-concessional contributions now to build up your super balance in time to maximise the cap when it applies.
Revisit pension splitting between spouses or partners, especially where one has a lower balance, to make optimal use of both individuals' caps.
For SMSF Trustees:
Asset revaluation strategy: Now is the time to ensure your fund's assets are fairly and accurately revalued, especially if you're nearing the $2M mark.
Segregated vs pooled asset structures: The upcoming change may influence whether you treat pension assets separately for tax purposes. Review your fund ’s approach.
Estate planning refresh: This cap change, while technical, could shift the dynamics of your death benefit planning, particularly for blended families or beneficiaries with their own super balances.
Caveats and Common Misunderstandings
Personal cap ≠ General cap: Not everyone will get the full $100K increase. If you’ve already commenced a retirement income stream, your personal cap may be proportionally indexed based on how much of your cap you've previously used.
This is not a contribution cap. You cannot directly “contribute” $2 million into the pension phase. You need to first have accumulated super and then transfer it into retirement phase subject to the cap.
Monitoring is key: The ATO tracks each individual’s Transfer Balance Account (TBA). Advisors should ensure accurate reporting of all pension commencements, commutations, and rollbacks.
What Should You Do Now?
Model your projected super balance as of 1 July 2025 to understand your TBC eligibility.
Seek advice on how best to structure contributions, commutations, and rollovers.
Coordinate with your accountant and financial advisor to align your tax, super, and estate strategies in light of the new threshold.
The $2.0M Transfer Balance Cap signals more than just an inflation adjustment. It offers a refined opportunity for long-term tax planning and retirement income optimisation. If you’re approaching retirement or managing a substantial super balance, now is the time to act. Let us help you make your next move the smartest one.
Contact The Ark’s Superannuation & Wealth Advisory Team for a personalised review before EOFY.