The Transfer Balance Cap: How Much Can Be Tax-Free?
There's a limit on how much super you can move into a retirement-phase pension, where earnings are tax-free: the transfer balance cap, currently $1.9 million. Anything above it stays in accumulation, where earnings are taxed at 15%.
- The cap: the general transfer balance cap is $1.9 million (from 1 July 2023) — the most you can transfer into retirement-phase income streams, where earnings are tax-free.
- The excess: amounts above your cap must stay in accumulation phase (earnings taxed at 15%) or be withdrawn; an excess in pension phase attracts a tax and must be removed.
- Personal caps: your own cap can differ from the general cap because of indexation and what you've already moved into pension phase.
01 What the cap limits
When you retire and start an account-based pension, the earnings on that pension are tax-free. The transfer balance cap limits how much you can move into that tax-free retirement phase — $1.9 million under the general cap from 1 July 2023. It doesn't cap how much super you can have; it caps how much can sit in the tax-free pension environment. Anything above it remains in accumulation phase, where earnings are taxed at 15%.
Shows: how much of the $1.9m transfer balance cap you'd use moving a balance into a retirement-phase pension. Ignores: your personal cap (which can differ from the general cap), indexation, and amounts already in pension phase.
The cap is routinely misunderstood as a limit on how large a retirement-phase pension may become. It is not. It measures what you transfer in, once, at the time you transfer it — so a pension started at $1.85 million that grows to $2.4 million has breached nothing, and investment growth inside retirement phase is never counted against it. The people who do breach it are usually those starting a second pension later, where the cumulative total is what matters.
On the defaults above, the worked example shows: Within the $1.9m cap; the pension earns income tax-free in retirement phase.
Source: ATO — Transfer balance cap
02 What happens to the excess
If you move more than your cap into retirement phase you have an excess transfer balance, and the response is prescribed rather than discretionary.
You must commute the excess — move it back to accumulation — or withdraw it from super entirely. On top of that you are charged excess transfer balance tax on the notional earnings the excess is deemed to have produced while it was in the tax-free environment, at 15% for a first breach and 30% for later ones.
The ATO detects this automatically, because funds report every transfer balance account event, so it is not something that goes unnoticed. You receive a determination setting out the excess and the period to act.
The practical lesson is that the cap is measured on the amount transferred in, not on the balance afterwards. A pension that starts at $1.85 million and grows to $2.3 million has not breached anything — growth inside retirement phase is not counted. But starting a second pension later, from an amount that pushes the cumulative transfers past your personal cap, does breach it, which is why the running total matters more than any single balance.
Source: ATO — Transfer balance cap
03 Why your personal cap may differ
The general cap has risen over time through indexation — from $1.6m to $1.7m to $1.9m. Your personal transfer balance cap depends on when you first started a retirement-phase pension and how much of your cap you've already used; people who started earlier may have a lower personal cap, and proportional indexation applies to your unused portion. The ATO tracks your transfer balance account, which you can view through myGov.
The cap is commonly understood as a single national figure, and it is not — each person has their own. Because it has been indexed in steps, your personal cap depends on when you first started a retirement-phase pension and how much of it you had already used, so two people retiring a year apart can have materially different caps and neither matches the headline number.
The full decision is in Minimum Pension Drawdowns: How Much You Must Take.
Source: ATO — Transfer balance cap
The transfer balance cap is one number that quietly shapes large balances at retirement. The key thing I tell people: above $1.9m isn't a penalty zone, it's just the line where earnings go from tax-free to 15%-taxed — still a good rate. Don't contort the plan to avoid 15% on the excess. And check your personal cap, not the headline one; if you started a pension before the last indexation, your figure may be lower than $1.9m.
FAQ
What is the transfer balance cap?
The limit on how much super you can move into a tax-free retirement-phase pension — $1.9 million under the general cap from 1 July 2023.
Does the cap limit how much super I can have?
No. It only limits how much can sit in the tax-free pension phase. The rest stays in accumulation, where earnings are taxed at 15%.
What happens if I exceed the cap?
You must move or withdraw the excess and you're charged excess transfer balance tax on its notional earnings while it was in pension phase.
Sources
Regulator references
- ATO — Transfer balance capThe transfer balance cap on the amount that can be moved into retirement phase.Last verified: 2026-06-19
- ASIC Moneysmart — Retirement income and taxThe sources of retirement income in Australia and how they combine.Last verified: 2026-06-19
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-06-19 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.