Superannuation Cap Set to Increase to $2 Million – What It Means for You

From 1 July 2025, the general transfer balance cap will increase to $2 million, giving Australians more room to transfer their superannuation savings into a tax-free retirement income stream.

Understanding the Transfer Balance Cap

The transfer balance cap (TBC) is the maximum amount of superannuation savings you can transfer into a tax-free retirement income stream, such as a pension account. Earnings on these funds in the retirement phase are tax-free, making it a valuable strategy for maximising your retirement income. Amounts exceeding this cap remain in your accumulation account, where earnings are taxed at 15%.​

Since its introduction in 2017 at $1.6 million, the cap has been periodically adjusted to reflect inflation:​

• 2017–2021: $1.6 million​

• 2021–2023: $1.7 million​

• 2023–2025: $1.9 million​

• 2025–2026: $2.0 million​

This upcoming increase to $2 million aligns with the latest adjustments based on the Consumer Price Index (CPI). ​

Implications for Your Retirement Planning

• For Future Retirees: If you plan to retire on or after 1 July 2025, you will have the opportunity to transfer up to $2 million into a tax-free pension account, enhancing your retirement income potential.​

• For Current Retirees: If you have already commenced a retirement phase income stream, your personal cap may increase proportionally, depending on the unused portion of your existing cap.​

Integrating Super Contributions into Your Tax and Financial Planning

Maximizing your superannuation contributions can be a highly effective strategy for reducing taxable income and building wealth for retirement. We recommend considering super contributions as part of your annual tax planning and broader financial strategy.​

Concessional Contributions: These are pre-tax contributions, including employer contributions and salary-sacrificed amounts, taxed at 15% within the super fund. Individuals can also make personal concessional contributions and claim a tax deduction, effectively reducing their taxable income. The annual cap for concessional contributions is $30,000, with provisions to carry forward unused amounts from previous years under certain conditions. ​

Non-Concessional Contributions: These are after-tax contributions for which no tax deduction is claimed. While they do not reduce taxable income, they can significantly boost retirement savings. The annual cap for non-concessional contributions is $120,000, with a bring-forward rule allowing up to $360,000 over three years for eligible individuals. ​

How We Can Assist

Navigating the complexities of superannuation contributions requires careful planning and expertise. Our team can help you:​

• Develop a Personalised Superannuation Strategy: Aligning your super contributions with your financial goals and retirement timeline.​

• Optimise Tax Benefits: Identifying opportunities to reduce taxable income through strategic concessional contributions.​

• Ensure Compliance: Monitoring contribution caps and carry-forward provisions to avoid excess contributions and associated penalties.​

• Holistic Financial Planning: Integrating superannuation strategies into an overall financial plan for you, considering factors like investment diversification, risk tolerance, and estate planning.​

Take Action Today

With the transfer balance cap set to increase, now is an ideal time to review your superannuation strategy. By proactively managing your contributions, you can enhance your retirement savings while benefiting from potential tax advantages.​

We are here to guide you through every step of this process. Contact us on 1300 022 267 today to schedule a consultation and take control of your financial future.