Transfer Balance Caps to Increase in FY26
In late February, the Australian Taxation Office confirmed the transfer balance cap will be indexed by $100,000 to $2.0 million as of 1 July 2025.
This will allow pre-retirees to contribute more superannuation to their retirement phase account while also providing retirees who have already begun an income stream the possibility of topping up, depending on unused cap space.
As always, please reach out to your adviser for any information regarding transfer balance caps. We’ll be more than happy to explain the changes and the implications for your superannuation.
What is the Transfer Balance Cap?
The general transfer balance cap refers to the amount of superannuation you can transfer from the accumulation phase into the retirement phase.
It also limits how much you can receive from a death benefits pension.
This is different from your personal transfer balance cap, which is unique to you when you begin a retirement income stream and your specific circumstances.
In the retirement phase, the superfund pays 0% on investment earnings, whereas in the accumulation phase, the superfund pays 15% tax on earnings.
That’s why pre-retirees and retirees need to be cognisant of changes, as it can inform future decisions around how you manage your superannuation.
Why is the Transfer Balance Cap Increasing?
The transfer balance increases in line with changes to the Consumer Price Index (CPI)
With the CPI reaching 139.4 in the December 2024 quarter, this met the criteria for an increase in the next financial year.
The Australian Tax Office confirmed the increase, with the cap to increase $100,000 to $2.0 million as of 1 July 2025.
The defined benefit income cap will also increase to $125,000 from 1 July 2025.
Historical and past transfer balance caps:
1 July 2017 - $1.6 million
1 July 2018 - $1.6 million
1 July 2019 - $1.6 million
1 July 2020 - $1.6 million
1 July 2021 - $1.7 million
1 July 2022 - $1.7 million
1 July 2023 - $1.9 million
1 July 2024 - $1.9 million
1 July 2025 - $2.0 million
How Does Indexation Impact My Personal Transfer Balance Cap?
For retirees who begin their retirement income stream after 1 July 2025, your personal transfer balance cap will be $2.0 million.
If you have already started a personal transfer balance cap, you will be entitled to a proportion based on how much of the cap you have already used.
However, if you have already reached or exceeded your transfer balance cap, you are not eligible for indexation.
Transfer balance cap indexation can also impact your total superannuation balance, in addition to non-concessional contribution caps, spouse offsets, and co-contributions.
If you’d like to learn more about your transfer balance cap or managing your superannuation, please reach out to the office on (02) 6185 2710 or contact your adviser directly.
