From 1 July 2026, the general transfer balance cap is set to increase from $2.0 million to $2.1 million, following the release of December quarter CPI data on 28 January. While the Australian Taxation Office is yet to formally confirm the change, indexation is now highly likely.
The transfer balance cap limits how much of your superannuation can be transferred into the tax-free retirement phase, such as an account-based pension or certain death benefit pensions. Any super above this cap must remain in accumulation phase, where earnings are taxed at up to 15%.
Why the Increase Matters
The increase means that, from July 2026, more of your super may be able to sit in the tax-free pension environment.
If you start a retirement-phase pension for the first time in the 2026–27 financial year, your personal transfer balance cap will be $2.1 million.
If you already have a pension in place, your personal cap may increase proportionally, depending on how much of your existing cap you have used. If you have already fully utilised your cap, you will not receive any indexation benefit.
Should You Start a Pension Now or Wait?
Once you meet a condition of release, starting a pension is often attractive because investment earnings, including capital gains, become tax-free.
However, to benefit from the higher $2.1 million cap, you would need to delay commencing a pension until after 1 July 2026. Doing so may mean paying some tax in the short term, as earnings in accumulation phase are taxed at 15%, but it could allow more of your super to sit in a tax-free environment over the long term.
This is very much a numbers-based decision and depends on your total super balance, whether you are likely to use your full transfer balance cap, your investment returns and tax position, and your spouse’s super balance, as death benefit pensions count towards your cap.
If you are unlikely to ever reach your full personal cap, there may be little benefit in delaying.
Transition-to-Retirement Pensions (TRIS)
Transition-to-retirement income streams can be commenced from age 60 and are commonly used to supplement income before full retirement.
While pension payments are tax-free, earnings on assets supporting a TRIS remain taxed as if in accumulation phase until you fully retire or reach age 65. At that point, the TRIS automatically becomes a retirement-phase pension and is assessed against your transfer balance cap.
This creates an important timing issue. If you will turn 65 before 1 July 2026 and want to maximise the benefit of the higher cap, it may be necessary to commute your TRIS back to accumulation phase before age 65, otherwise it will be locked in under the current $2.0 million cap.
Flow-On Effects to Other Super Rules
Indexation of the transfer balance cap affects more than just pensions.
From 1 July 2026, the total superannuation balance threshold used across multiple super rules will increase to $2.1 million. Your total super balance determines whether you can make non-concessional contributions, whether you can use the bring-forward rule, eligibility for government co-contributions, and eligibility for the spouse contribution tax offset.
If your total super balance is below $2.1 million on 30 June 2026, you may be eligible to make non-concessional contributions from July, provided you are under age 75.
Defined Benefit Pensions
From 1 July 2026, the defined benefit income cap will increase to $131,250.
For taxed defined benefit pensions, 50% of any income above this level will be included in assessable income and taxed at marginal rates. For untaxed schemes, such as certain public sector funds, the maximum available tax offset will increase to $13,125.
What About Contribution Caps?
The increase in the transfer balance cap does not automatically change contribution caps.
Concessional contribution caps are indexed to wages rather than inflation and increase in $2,500 increments. Based on current expectations, the concessional cap is likely to rise from $30,000 to $32,500 from 1 July 2026, subject to confirmation in February.
If that occurs, the non-concessional contributions cap would increase to $130,000 per year, or $390,000 under the bring-forward rule.
Key Takeaway
The increase in the transfer balance cap creates planning opportunities, but the benefits are highly individual. Decisions around when to start a pension, how to structure TRIS arrangements, and whether to contribute additional funds to super should be made with careful modelling and advice.