In this guide
- The transfer balance cap (TBC) and how it changes
- How do the transfer balance cap rules work?Â
- Does this mean I can’t have more than my TBC amount in super?
- What is a transfer balance account?
- What counts towards the transfer balance cap?
- What happens if I breach the TBC?
- What happens when the cap is indexed?
- Death and the transfer balance cap
One of the most significant changes to super – the introduction of the transfer balance cap (TBC) – came into effect on 1 July 2017. The cap rose for only the second time on 1 July 2023, so it’s worth understanding how it is applied and how to take advantage of new opportunities when it’s increased.
As the name suggests, the TBC limits how much super retirees can transfer into a super pension account.
Anybody who retires has the choice of accessing their super either as a lump sum, an income stream or a combination of both. If they access any of their super as an income stream, the income earned on the capital supporting that income stream is tax free.
The introduction of the TBC was designed to reinforce the role of super to provide retirement income, not as a store of intergenerational wealth or means of avoiding tax.
The transfer balance cap (TBC) and how it changes
On 1 July 2017, a cap on the amount that can be used to commence a pension in retirement phase was introduced. The cap was initially set at $1.6 million.
The cap is indexed periodically in $100,000 increments, in line with inflation. Indexation first occurred on 1 July 2021, when the cap increased to $1.7 million, and a spike in inflation caused a jump to $1.9 million on 1 July 2023.
Need to know
The general TBC is used as a cap for some other super measures, so its indexation impacts the ability of individuals with high super balances to take advantage of those measures.
- Your Total Super Balance (TSB) on 30 June must be under the general TBC to make non-concessional contributions or be eligible for a co-contribution in the following financial year.
- Your spouse’s TSB must be under the cap on 30 June for you to claim a tax offset for contributions you make to their super in the following financial year.
- You must have a TSB lower than the transfer balance cap less 2 x the non-concessional contribution cap to use the three-year bring-forward rule for non-concessional contributions.
