Change to the Transfer Balance Cap (Mar 25 Tax Update)
Relevant For:
People in or approaching retirement with a large superannuation balance.
Key Points:
- The Transfer Balance Cap restricts superannuation transferred to retirement income streams.
- Retirement phase earnings and withdrawals after age 60 can be tax-free.
- From 1 July 2025, the cap rises to $2 million.
- Exceeding the cap requires withdrawal or re-transfer, incurring excess transfer balance tax.
Full Article:
The Australian Government sets a lifetime limit known as the Transfer Balance Cap, restricting how much superannuation you can shift into retirement-phase income streams. From 1 July 2025, this cap will increase to $2.0 million, adjusted in $100,000 increments based on the Consumer Price Index (CPI).
Funds held within these retirement income streams benefit from tax-free earnings, and any withdrawals you make after reaching 60 are also tax-free.
The Transfer Balance Cap applies to the total amount transferred into all retirement streams during your lifetime—not annually—so it’s crucial to keep track of this amount carefully.
If you commenced a retirement income stream before July 2025, your personal cap would range from $1.6 million to $1.9 million, depending on the start date. Any amount exceeding your personal cap must be withdrawn and either paid in cash or returned to your accumulation super account.
The Australian Taxation Office (ATO) will notify you if you exceed the cap, requiring payment of excess transfer balance tax.