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Transfer Balance Cap Explained
The limit on how much you can transfer into tax-free pension phase.
The Transfer Balance Cap (TBC) limits how much superannuation you can transfer into the tax-free retirement phase. This cap was introduced in 2017 to ensure wealthy retirees can't shelter unlimited amounts of super from tax.
If you have substantial super savings, understanding the TBC is crucial — exceed it and you'll face penalties.
🔑 TBC at a Glance
- The TBC limits how much you can transfer into retirement phase pensions (where earnings are taxed at 0%)
- Your personal TBC may be less than the general cap if you started a pension before recent indexation
- TBC is tracked via your Transfer Balance Account (TBA) — like a running tally
- Exceeding your TBC triggers excess transfer balance tax on deemed earnings
- The TBC only applies to retirement phase pensions — not accumulation accounts or TRIS
TBC vs TSB: Two Different Limits
People often confuse the Transfer Balance Cap with the Total Super Balance. They're different measures for different purposes:
📊 Transfer Balance Cap (TBC)
Limits pension phase transfers
- Limits money into retirement phase
- Currently general cap
- Only counts pension commencements
- Investment growth doesn't affect it
- Tracked via Transfer Balance Account
📈 Total Super Balance (TSB)
Affects contribution eligibility
- Sum of all your super accounts
- Currently blocks NCC
- Includes accumulation + pension
- Investment growth does affect it
- Measured at 30 June prior year
How the TBC Works: Credits and Debits
The ATO tracks your pension transfers through your Transfer Balance Account (TBA). Think of it like a bank account that records pension "credits" and "debits":
| TBA Credits (Use Up Your Cap) | TBA Debits (Free Up Your Cap) |
|---|---|
| Starting an account-based pension | Commuting pension back to accumulation |
| TRIS converting to retirement phase | Commuting pension as a lump sum |
| Receiving a reversionary pension (12 months after death) | Rolling pension to a different fund |
| Certain structured settlement contributions | ATO-directed commutations for excess TBC |
⚠️ Investment Growth Doesn't Create Credits
A common misconception: if you start a $1 million pension and it grows to $1.5 million, your TBA credit is still $1 million. Investment growth (or loss) inside your pension doesn't change your Transfer Balance Account. This is good news if your pension grows beyond the cap.
Your Personal TBC May Be Different
Not everyone has the same TBC. Your personal transfer balance cap depends on when you first started a retirement phase pension:
Anyone who started a pension on or after this date began with the cap at that time.
If you hadn't used any of your cap, your personal cap increased to $1.7m.
Again, only if you had unused cap space.
Current general cap (for those who haven't started a pension yet).
Example: Proportional Indexation
Janet started a pension with $800,000 on 1 January 2018. Her TBC at that time was $1.6 million, so she used 50% of her cap.
When the general TBC increased to $1.9 million, Janet's personal cap only increased by 50% of the indexation:
- Indexation increase: $300,000 ($1.9m - $1.6m)
- Janet's proportional increase: 50% × $300,000 = $150,000
- Janet's new personal TBC: $1.6m + $150,000 = $1.75 million
If Janet had never started a pension, her personal TBC would be the full general cap of .
What Happens If You Exceed Your TBC?
🚫 Excess Transfer Balance Tax
If your TBA exceeds your personal TBC, the ATO will:
- Issue an Excess TBC Determination telling you the amount of excess
- Calculate notional earnings on the excess amount (based on the ATO's default interest rate)
- Assess excess transfer balance tax on those notional earnings:
- First breach: 15%
- Subsequent breaches: 30%
- Require you to commute the excess amount back to accumulation or out of super
The tax is on the notional earnings, not the excess amount itself. But because the ATO's interest rate can be higher than actual earnings, and because subsequent breaches attract 30% tax, exceeding your TBC can be costly.
Managing Your TBC
If You Have More Than $2 Million in Super
You can't transfer everything into pension phase. Your options:
- Transfer up to your TBC into pension phase (tax-free earnings)
- Leave the excess in accumulation (earnings taxed at 15%)
- Withdraw the excess as a lump sum (tax-free if over 60, but now outside super)
Example: David's Super Strategy
David has $2.5 million in super and his personal TBC is $2 million.
- He starts a pension with $2 million (uses full TBC)
- Remaining $500,000 stays in his accumulation account
- Pension earnings: tax-free
- Accumulation earnings: taxed at 15%
David could also withdraw the $500,000 as a tax-free lump sum — but then it's outside super and subject to personal tax on any future earnings.
Couples Strategy
Each person has their own TBC. For a couple, that's up to $4 million in tax-free pension phase between them. If one partner has more super than their cap allows, they can't simply give the excess to their spouse — but strategic planning over time (like contribution splitting) can help balance things out.
TBC and Reversionary Pensions
If you receive a reversionary pension (your spouse's pension automatically continuing to you after their death), it creates a TBA credit — but you get 12 months before it's counted. This gives you time to manage your own cap.
If receiving the reversionary pension would push you over your TBC, you may need to commute part of your own pension or the inherited pension within that 12-month window.
Checking Your Transfer Balance Account
You can check your TBA through:
- ATO online services via myGov — look for "Super" then "Transfer balance cap"
- Your super fund — they report to the ATO and can tell you your current position
- Tax agent — can access ATO records on your behalf
Near or Over the Transfer Balance Cap?
Managing large super balances requires careful planning for tax efficiency and avoiding penalties.
Last updated:
Disclaimer
NOT PERSONAL ADVICE — TBC rules are complex, especially for those with large balances or defined benefit pensions. Seek professional advice.