In this guide
Significant changes were made to the Australian superannuation system in 2017 with the introduction of the transfer balance cap (TBC).
The TBC is a limit, referred to as a “cap”, on the amount of your retirement savings held in super that can be moved into pension or retirement phase, where all fund earnings associated with these pensions become tax free.
The TBC was initially set at $1.6 million and is subject to indexation in line with inflation in $100,000 increments. The first indexation occurred on 1 July 2021 when the cap was initially increased to $1.7 million.
Further indexation took place on 1 July 2023 when the cap was increased to $1.9 million; the high levels of inflation over the prior 12-month period resulted in a $200,000 increase.
How indexation works
If you have previously started an income stream, your personal transfer balance cap will be adjusted for indexation based on the proportion of the cap you have already used.
If you have previously started a retirement phase income stream using your entire personal transfer balance cap that was relevant at that time, then you will not be eligible for any level of indexation in the future.
Conversely, those who are yet to start a retirement phase income stream will receive the full increase to their personal cap due to indexation. For instance, where you have not yet commenced a retirement phase income stream, you will have a personal transfer balance cap that is equal to the general transfer balance cap, currently $1.9 million.
Partial indexation will apply for those who have already started retirement phase income streams but only where they have some amount of their original cap remaining.
Due to the complexity of the TBC rules and especially around the way that the indexation rules apply, there will be no single TBC that will apply to everybody. For that reason, it’s important you know your own personal position and understand what has been recorded within your transfer balance account.
Read more about the transfer balance cap.
Transfer balance account
To monitor pension balances and transactions that affect your own personal transfer balance cap, the government introduced a recording system referred to as the transfer balance account (TBA).
When you first begin a retirement phase income stream, a TBA will be established in your name with the Australian Taxation Office (ATO) recording all relevant events that count towards your transfer balance cap. We will look at these relevant events shortly.
Therefore, everyone in retirement phase will have a TBA. If you have more than one super pension account, the amounts used to commence those pensions will be aggregated in the one TBA.
Your TBA remains active until your death.
Super tip: You can access your individual TBA through myGov. Just log in to your myGov account and click through to the Superannuation area.
SMSF reporting requirements
If you are a member of an industry or retail super fund, then the trustees of your fund will meet the reporting requirements for your account-based super income streams. You don’t need to do anything.
If you have an SMSF, then you are responsible for reporting all transactions that affect any of the members’ TBA, including details around the commencement of retirement phase income streams and other relevant events.
All relevant transactions need to be reported by SMSF trustees on a quarterly basis by lodging a transfer balance account report (TBAR) with the ATO within 28 days following the end of the relevant quarter.
