Understanding the difference between your total super balance and your transfer balance cap

Let’s start with total super balance. This is a fairly easy concept to understand. It’s usually the total amount of money you have in your super at any one time. The ATO measures your TSB each 30 June to determine which super measures you are eligible to use in the following financial year.

You can find your TSB via your myGov account using the linked ATO service, or by calling the ATO super line on 13 10 20. If you’re in a large fund, your new 30 June TSB generally becomes available around 12 July each year. If you have a self-managed super fund (SMSF), the TSB will not be updated until you have submitted your SMSF annual return.

The ATO says your TSB equals the sum of the following:

• The accumulation phase value of your super interests that are not in the retirement phase
• The retirement phase value of your super interests
• The amount of each rollover super benefit not already reflected in the accumulation phase value or the retirement phase value (that is, rollovers in transit between super funds on 30 June)
• In certain circumstances, the outstanding balance belonging to a limited recourse borrowing arrangement (LRBA) in an SMSF (or other regulated super fund with less than five members) you entered into from 1 July 2018, if either:
  • The LRBA is with an associate of the fund
  • You have satisfied a condition of release with a nil cashing restriction.

Your TSB matters when determining your eligibility for a range of features in the super system.

Super measures affected by your TSB

Your TSB is relevant when working out whether you are eligible for six super measures. These are:

1. Carry-forward (catch-up) concessional contributions
2. Non-concessional contribution cap and bring-forward contributions
3. Work test exemption
4. Co-contribution
5. Spouse tax offset
6. Segregated asset method for calculating exempt current pension income (only relevant for SMSFs)

For some of these measures, your TSB must be below the general transfer balance cap (TBC) for the year. This is where the confusion between the two terms comes from. In 2024–25 the general transfer balance cap is $1.9 million.

The carry-forward concessional contribution measure allows you to contribute more than the standard annual concessional cap in one year without generating excessive contributions. To do this, you use carried forward cap ‘space’ you didn’t take advantage of in prior years. To be eligible for this measure, your TSB needs to be below $500,000 on 30 June of the financial year prior to the year you are using the carry forward.

Your non-concessional contribution cap is zero for the financial year if your TSB was higher than the general transfer balance cap on 30 June of the prior financial year. This means that if your balance on 30 June 2024 was $1.9 million or more, your non-concessional contribution cap is zero in 2024–25.

A high TSB also affects how you can use bring-forward contributions. The bring-forward measure allows you to contribute up to three years’ annual non-concessional cap in one year by ‘bringing forward’ contribution cap amounts from future years. The current annual non-concessional cap is $120,000, which means you can contribute up the $360,000 in one year.

If your TSB on 30 June is more than $240,000 lower than the general transfer balance cap, you have access to the ‘standard’ three-year bring-forward period in the following financial year. A higher TSB means the rule is modified or not available.

To use the work test exemption in the year after retirement and make personal tax-deductible contributions, your TSB on the prior 30 June must be below $300,000.

To receive a government co-contribution your TSB must be below the general transfer balance cap on the prior 30 June, and to receive a tax offset for contributions you make to your spouse’s account, their TSB must be below the general transfer balance cap on the prior 30 June.

The transfer balance cap (TBC)

The transfer balance cap is a little more complex, but the good news is you don’t need to worry about it too much if you’re still in accumulation phase. It only comes into play as you approach or enter retirement.

The TBC is the limit on the amount you can transfer from accumulation phase to support a retirement income stream. It started at $1.6 million on 1 July 2017 and since 1 July 2023 stands at $1.9 million thanks to indexation.

It’s important because the income earned on capital supporting a pension is concessionally taxed in the fund at 0%. A cap was introduced to limit the amount of tax-free funds available to retirees in retirement phase.

A transfer balance account will be established for you once you start a retirement income stream. It’s a record of all the events that count towards your TBC. When you start a retirement income stream, its value is added to your account. When you make a commutation from the income stream (lump sum withdrawal or transfer back to the accumulation phase), the amount of the commutation is subtracted.

What is, and isn’t, included in my transfer balance cap?

If you start a transition-to-retirement income stream (TRIS) before you retire, it will not be included in your transfer balance account. This also applies to any amount you have in an accumulation account. 

The ATO says that a TRIS starts to count towards your TBC on the day it becomes a retirement phase income stream based on its value on that day.

The amount supporting a retirement income stream is counted against your TBC by being added to your transfer balance account at the time you commence the pension. Pension payments and investment earnings do not have any effect on the account.

You can have more than one pension, but the balance of your transfer balance account cannot exceed your TBC otherwise a tax penalty will apply until you transfer the excess amount back into an accumulation account or remove it from super entirely.

Once you have started a retirement income stream, you have a personal transfer balance cap that may not be the same as the general cap. When the general cap is indexed, you are entitled only to a proportion of the indexation that corresponds to the amount of the cap you have not already used.

The bottom line

Although the same limit applies to both your transfer balance cap amount and your total super balance in some instances, they are not the same thing. It’s important to remember how they are calculated to avoid extra tax and remain aware of the features of the super system you are entitled to.