Skip to main content

The Super "Transfer Balance Cap" in Summary

The Superannuation "Transfer Balance Cap"


The Transfer Balance Cap (TBC) announced in the 2016 Federal Budget placed a cap on the amount of money individuals could have in their tax free pension phase account from July 1, 2017. The initial transfer balance cap of $1.6M was not intended to be static and was designed to move in concert with the consumer price index (CPI), in stepped $100,000 increments. Accordingly, the TBC increased to $1.7M with effect from 1 July, 2021 and thereafter to $1.9M on 1 July, 2023.

Transfer Balance Cap (TBC)

Each individual has personal transfer balance cap (TBC) linked to the general transfer balance cap. While all super members who were in receipt of a pension up to June 30, 2021 will have a personal balance cap of $1.6 million other fund members will have a cap based on when they first became entitled to a pension and the general balance applying in the relevant financial year. Individuals can find out their TBC by accessing their myGov account.

The transfer balance account is intended to operate in the same fashion as a bank account - with assets transferred into the retirement phase counting towards the cap; and transfers out counting as debits. Where an individual starts to have a transfer balance account and does not use the full amount of their cap, their personal transfer balance cap will be subject to "proportional indexation."

Probably the best way to understand this approach is by reference to an example provided in the original Explanatory Memorandum (EM) provided by the Government (Example 1.2):

Amy’s transfer balance account is credited by $800,000 in 2017-18. At that time, she has used 50 per cent of her $1.6 million personal transfer balance cap.

When the general transfer balance cap is indexed to $1.7 million in 2020-21, Amy’s personal transfer balance cap is increased proportionally to $1.65 million. That is, Amy’s personal transfer balance cap is increased by 50 per cent of the corresponding increase to the general transfer balance cap. As such, Amy can now contribute $850,000 without breaching her personal cap".

Breaching the Cap

Individuals who breach the transfer balance cap will have their superannuation income streams commuted (in full or in part) back to the accumulation phase and will pay an "excess transfer balance tax".

Again, probably the best way to understand how these breaches will be handled, is by reference to an example provided in an Explanatory Memorandum (EM) provided by the government (Example 1.14):

On 1 July 2017, Rebecca commences a superannuation income stream of $1 million from the superannuation fund her employer contributed to (Master Superannuation Fund). On 1 October 2017, Rebecca also commences a $1 million superannuation income stream in her SMSF, Bec’s Super Fund.

On 1 July 2017, Rebecca’s transfer balance account is $1 million. On 1 October 2017, Rebecca’s transfer balance is credited with a further $1 million bringing her transfer balance account to $2 million. This means that Rebecca has an excess transfer balance of $400,000.

On 15 October 2017, the Commissioner issues an excess transfer balance determination to Rebecca setting out a crystallised reduction amount of $401,414 (excess of $400,000 plus 14 days of notional earnings). Included with the determination is a default commutation authority which lets Rebecca know that if she does not make an election within 60 days of the determination date the Commissioner will issue a commutation authority to Bec’s Super Fund requiring the trustee to commute her $1million superannuation income stream by $401,414".

The "excess transfer balance tax" above is payable on the "notional earnings" of the excess amount so that no benefit accrues from having had the "excess capital" in a tax-free environment, rather than an accrual account where 15% tax is payable.

In terms of expatriates, we would just stress that the TBC applies on an individual basis; providing couples with twice the available headroom should they be transferring pension funds and assets into superannuation prior to return/retirement in Australia.

If you would like to arrange professional advice please complete the Inquiry form below providing details and you will be contacted promptly.

IMPORTANT: The material contained in this website and other associated communications is only intended as general, background information and must not be relied upon. No warranty is provided in relation to any material or to the services that may be contracted through It is recommended that individuals seek the advice of qualified professionals before taking any action.