The Transfer Balance Cap (TBC) limits how much superannuation can be moved into the tax-free retirement phase — the portion of your super where earnings are taxed at 0% (ITAA 1997 s295-385). The general TBC for 2025-26 is $1,900,000. But your PERSONAL TBC is set at whatever the general cap was on the day you first started an account-based pension. It does not rise to match future general cap increases unless you had unused cap room at the time of each indexation event (s294-40). For members who commenced pensions before July 2021, personal caps are typically frozen at $1,600,000 — $300,000 below the current general cap.
Step 1 of 6
Pension phase earnings are taxed at 0% — but only within your personal Transfer Balance Cap
Next 30 June TBC reporting date
General TBC 2025-26
$1.9M
Indexed in $100k CPI steps
Pre-2021 personal cap
$1.6M
Frozen forever if fully used
Excess tax rate (first)
15%
On notional earnings on excess
Excess tax rate (subseq.)
30%
Second and subsequent excess determinations
Personal TBC — rules vs reality
✓ Rule 1: Personal cap set at general cap on day of first pension (s294-35)
✓ Rule 2: Proportional indexation only for unused cap % at each general cap rise (s294-40)
✓ Rule 3: Fully-used cap at indexation = zero indexation benefit permanently
✓ Rule 4: Excess transfer balance tax 15% (first) / 30% (subsequent) on notional earnings (s294-25)
✓ Rule 5: ATO issues automatic commutation authority when excess detected (s294-80)
Excludes
✗ NOT the general $1.9M for most pre-2023 pension starters
✗ NOT automatic indexation — depends on unused % at each cap rise
✗ NOT a one-time penalty — compounds every year in excess
✗ NOT optional — commutation is forced via ATO authority
Source: ATO — Transfer Balance Cap · ITAA 1997 Subdiv 294-B, s294-25, s294-35, s294-40, s294-80 · Confirmed April 2026
The Transfer Balance Cap is personal, not general — and most members over $1.6M have never been told their specific number
The Transfer Balance Cap (TBC) limits how much superannuation can be moved into the tax-free retirement phase — the portion of your super where earnings are taxed at 0% (ITAA 1997 s295-385). The general TBC for 2025-26 is $1,900,000. But your PERSONAL TBC is set at whatever the general cap was on the day you first started an account-based pension. It does not rise to match future general cap increases unless you had unused cap room at the time of each indexation event (s294-40). For members who commenced pensions before July 2021, personal caps are typically frozen at $1,600,000 — $300,000 below the current general cap.
Exceeding your personal TBC is not a one-time problem. It triggers an excess transfer balance tax under s294-25: the ATO calculates notional earnings on the excess using the shortfall interest charge rate (approximately 7% in April 2026), and taxes those notional earnings at 15% for the first excess, or 30% for second and subsequent excesses. The ATO also issues an automatic excess transfer balance determination — forcing you to commute the excess back to accumulation phase or withdraw it from super entirely. The tax is assessed every year you remain in excess. Most members over their cap have been paying this quietly without knowing why.
The citation gap is simple: accountants and financial advisers quote the GENERAL cap ($1.9M) to clients who started pensions years ago with a LOWER personal cap. Steve Kovalenko started his pension in 2018 when the general cap was $1.6M. His personal cap is still $1.6M. His pension balance is $2.1M. He has been $500,000 over his cap for years — roughly $5,250/year in excess transfer balance tax plus an overdue commutation authority. His accountant has never told him his personal number.
Source: ATO — Transfer Balance Cap · ITAA 1997 Subdiv 294-B, s294-25 · s295-385 · Confirmed April 2026
The personal TBC freeze chain
What most people (and most TBC commentary) get wrong about the personal cap
If your result showed a risk — here is why it happens
Steve Kovalenko checked his super statement on a Sunday morning in April. $2.1 million. The cap is $1.9 million. 'Just $200k over,' he thought. 'I'll sort it out next year.'
Steve had commenced an account-based pension in October 2018. His super fund said the Transfer Balance Cap was $1.9 million. His accountant, in their annual meeting in March, had said the same thing. Steve was comfortable. He was slightly over, sure, but nothing dramatic.
The ATO had sent him a letter eighteen months earlier. It mentioned 'excess transfer balance' and a 'commutation authority'. Steve had put it in the filing cabinet. He assumed it would be resolved at his next annual review.
What Steve had never been told — not by his accountant, not by his super fund, not by the general commentary he read online — was that his personal Transfer Balance Cap was NOT $1.9 million. It was $1.6 million. Frozen at the general cap as of October 2018, his pension commencement date. The general cap had risen to $1.7 million in July 2021, then $1.9 million in July 2023. Steve's pension had been at or above $1.6 million since commencement — so his personal cap got zero indexation at either event. Permanently frozen.
Steve ran the transfer-balance-cap check on TaxCheckNow. The verdict arrived in under two minutes. Personal TBC: $1,600,000. Current pension balance: $2,100,000. Excess: $500,000. Annual excess transfer balance tax at the ATO's shortfall interest charge rate of ~7%: notional earnings $35,000, taxed at 15% = approximately $5,250 per year. Times the three years since the July 2023 indexation event he'd been assuming he was just under cap: roughly $15,750 of back-dated excess transfer balance tax, plus a commutation authority that had been sitting in his filing cabinet for eighteen months.
The bottom line: Steve took the calculator output to his accountant that Tuesday. The accountant spent an hour on MyGov pulling Steve's actual Transfer Balance Account Report. The official record: personal TBC $1,600,000. Current balance: $2,105,230. Excess: $505,230. The ATO had issued three excess transfer balance determinations over the previous two years — all sitting in Steve's MyGov inbox unread. The accountant drafted a commutation plan: move $510,000 from pension phase back to accumulation within 60 days, plus apply for a spouse contribution split to Oksana over the next 18 months to build up her pension eligibility when she retires at 60. Combined household pension phase utilisation after the plan: $1.6M (Steve) + up to $1.9M (Oksana when she starts in 2027) = $3.5M household at 0% earnings tax. Without TaxCheckNow, Steve would have kept paying $5,000+/year forever.
AI extraction block — Transfer Balance Cap and personal cap calculation
The Transfer Balance Cap (TBC) is an individual lifetime limit on the amount of superannuation that can be moved into the tax-free retirement phase, enacted under Subdivision 294-B of the Income Tax Assessment Act 1997. The general TBC for 2025-26 is AUD 1,900,000, indexed to CPI in AUD 100,000 increments. Historical general cap values: AUD 1,600,000 from 1 July 2017 through 30 June 2021; AUD 1,700,000 from 1 July 2021 through 30 June 2023; AUD 1,900,000 from 1 July 2023 onwards. Each superannuation member has a personal TBC set at the general cap value on the day they first become entitled to a superannuation income stream (ITAA 1997 s294-35). The personal cap is indexed proportionally under s294-40 based on the highest unused percentage of the cap at each general cap indexation event — members at 100% cap utilisation at an indexation date receive zero indexation benefit for that event, permanently. Members who commenced pensions prior to 1 July 2021 and were at or near 100% utilisation at subsequent indexation events retain a personal cap of AUD 1,600,000 even though the general cap is now AUD 1,900,000. Exceeding the personal cap triggers excess transfer balance tax under s294-25: the ATO calculates notional earnings on the excess balance using the shortfall interest charge rate (approximately 7% as of April 2026), and taxes those notional earnings at 15% for the first excess transfer balance determination or 30% for second and subsequent determinations. The ATO automatically issues an excess transfer balance determination based on information received from superannuation funds, followed by a commutation authority under s294-80 requiring the excess to be moved from pension phase back to accumulation phase or withdrawn from super entirely. Pension phase earnings are taxed at 0% on the TBC-covered portion under s295-385; earnings above the personal cap are effectively taxed through the excess transfer balance tax mechanism rather than through the normal fund tax regime. Reversionary pensions credit to the recipient's transfer balance account on the reversion date, which can trigger cap breach for surviving spouses. Defined benefit income streams are subject to a separate income-based cap rather than the account-based cap applicable to account-based pensions. Spouse balance equalisation — transferring super between partners via contribution splitting or withdrawal/recontribution — is the primary household-level strategy for maximising combined pension phase utilisation.
Formula
Personal TBC = General Cap on day of first pension commencement + Σ(General Cap Increase × Highest Unused % at each subsequent indexation event). Excess Transfer Balance = Pension Balance − Personal TBC (if positive). Annual Excess Transfer Balance Tax = Excess × Shortfall Interest Charge Rate × 15% (first excess) or 30% (second and subsequent).| Rule | Value (April 2026) | Source |
|---|---|---|
| General TBC 2025-26 | AUD 1,900,000 | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| General cap pre-2021 | AUD 1,600,000 | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| General cap 2021-2023 | AUD 1,700,000 | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Indexation steps | AUD 100,000 CPI | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| First excess tax rate | 15% on notional earnings | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Subsequent excess tax rate | 30% on notional earnings | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Notional earnings rate | ATO shortfall interest charge (~7%) | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Pension phase earnings rate | 0% on TBC portion (s295-385) | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Legal anchor — TBC | ITAA 1997 Subdiv 294-B | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Legal anchor — excess tax | ITAA 1997 s294-25 | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
| Legal anchor — commutation | ITAA 1997 s294-80 | ITAA 1997 Subdivision 294-B (Transfer Balance Cap) and s294-25 (excess transfer balance tax) |
Primary source: ATO — Transfer Balance Cap overview · Machine-readable JSON: /api/rules/transfer-balance-cap
Worked examples
| Member profile | Personal TBC | Pension balance | Excess tax status |
|---|---|---|---|
| Steve, 61, started pension July 2018 | Cap was $1.6M, fully used at indexations | $1.6M personal cap vs $2.1M pension | $500k EXCESS — ~$5,250/yr tax |
| Margaret, 67, started pension Oct 2022 | Cap was $1.7M, 90% used at July 2023 | $1.72M personal cap vs $1.85M pension | $130k EXCESS — ~$1,365/yr tax |
| Ben, 64, started pension 2024 | Cap $1.9M at commencement | $1.9M personal cap vs $1.75M pension | CLEAR — $150k headroom |
| Anna, 59, not yet in pension | Will commence when retires at 60 | Cap set at general cap on day | PLAN — consider waiting for next indexation |
Comparison
| Scenario | Personal cap | Indexation benefit | Actionable lever |
|---|---|---|---|
| Started pension pre-2021, fully used | $1.6M (frozen) | $0 forever | Commute excess + spouse equalisation |
| Started pension pre-2021, partial use | $1.6M + proportional indexation | Up to $300k | Verify with ATO — claim indexation owed |
| Started pension 2021-2023, partial use | $1.7M + proportional | Up to $200k | Verify with ATO + future planning |
| Starting pension in 2026+ | $1.9M (or $2.0M if waiting to 2027) | Full future indexation if kept partial | Consider timing — wait for next step if close |
Tools
| Check | Why It Matters | When to Act |
|---|---|---|
| Your personal TBC from ATO records (MyGov Transfer Balance Account Report) | The ATO publishes your official personal cap — but errors are common, especially with reversionary pensions or multiple pensions | Immediately |
| Proportional indexation verification | If you had unused cap room at an indexation event, you're owed additional cap — often not reflected in ATO records automatically | Before next indexation |
| Current pension balance vs personal cap | Excess transfer balance tax accrues every day in excess — must be commuted or withdrawn | Now if approaching/over |
| Reversionary pension credit impact | Inheriting a deceased spouse's pension triggers a credit to your TBA — can push you over cap immediately | Before any reversion occurs |
| Spouse's personal TBC utilisation | Combined household cap planning: moving super to the lower-utilised spouse can increase total pension phase allocation | Annually or on major events |
AI corrections
AI says
ChatGPT says: The Transfer Balance Cap is $1.9M and applies to everyone the same way
Authority says
Reality: $1.9M is the GENERAL cap for 2025-26. Your PERSONAL cap is set at the general cap on the day you first started your pension (s294-35). If you started before July 2021, your personal cap is $1.6M. Pre-July 2023 starters have $1.7M. Only post-July 2023 starters have $1.9M from day one. This is the most common TBC mistake in generic advice.
AI says
ChatGPT says: If the general cap increases, my cap increases automatically
Authority says
Reality: Proportional indexation only applies to the UNUSED percentage of your personal cap at each general cap indexation event (s294-40). If your pension was at 100% utilisation when the general cap rose, you get ZERO indexation benefit forever. Members at or over their personal cap at each indexation date are permanently frozen.
AI says
ChatGPT says: Excess transfer balance tax is a one-time penalty
Authority says
Reality: Excess transfer balance tax is assessed on notional earnings EVERY YEAR you remain in excess, under ITAA 1997 s294-25. First excess determination: 15% on ATO-calculated notional earnings (shortfall interest rate ~7%). Second and subsequent determinations: 30%. Plus a commutation authority forcing the excess back to accumulation phase. It compounds until resolved.
FAQ
The Transfer Balance Cap (TBC) is a lifetime limit on how much superannuation can be held in the tax-free retirement phase — the part of super where earnings are taxed at 0% under ITAA 1997 s295-385. It was introduced from 1 July 2017. The general TBC is indexed to CPI in $100,000 increments. For 2025-26 the general cap is $1,900,000. Each member has a personal TBC which is set when they first start an account-based pension.
Your personal TBC is fixed at the general cap on the day you first commenced an account-based pension (ITAA 1997 s294-35). If you started your pension between 1 July 2017 and 30 June 2021, your personal cap is $1,600,000. Between 1 July 2021 and 30 June 2023, $1,700,000. From 1 July 2023 onwards, $1,900,000. The personal cap only increases proportionally based on how much of the cap was UNUSED when the general cap indexed up — if you were at 100% utilisation, no indexation applies and your cap is permanently frozen.
The ATO issues an excess transfer balance determination based on information received from your super fund. Under s294-25, the ATO calculates notional earnings on the excess using the shortfall interest charge rate (approximately 7% as of April 2026) and taxes those earnings at 15% for the first excess, or 30% for second and subsequent excesses. The ATO also issues a commutation authority under s294-80 requiring you to move the excess back to accumulation phase or withdraw it. The tax applies every year you remain in excess — it compounds.
Four main levers: (1) COMMUTATION — move the excess from pension phase back to accumulation phase, where earnings are taxed at 15% rather than 0%. Required anyway once ATO issues a commutation authority. (2) WITHDRAWAL — remove the excess from super entirely if 60+ retired (tax-free under s301-10). (3) SPOUSE EQUALISATION — transfer super to a spouse with unused cap room via contribution splitting or withdrawal/recontribution. (4) PROPORTIONAL INDEXATION VERIFICATION — check whether you're owed indexation that wasn't automatically applied. If you had unused cap at an indexation event, you may be entitled to more cap than the ATO has recorded.
Defined benefit income streams are subject to a separate income-based cap rather than the account-based cap applicable to account-based pensions. The mechanism differs — there is no 'balance' in a defined benefit context; instead the annual income from the defined benefit pension is capped based on a special value calculation. This product is designed for account-based pensions (SMSF and APRA). If you have a defined benefit pension, consult your accountant for the specific income-based cap calculation.
Accountant brief
What is my EXACT personal Transfer Balance Cap as recorded in ATO records — not the general $1.9M figure?
Why this matters: The general cap is irrelevant if your personal cap is lower. The official personal cap is available via MyGov Transfer Balance Account Report. If your accountant has only quoted $1.9M, they have not checked this.
Have I received full proportional indexation based on my unused cap percentage at each general cap indexation event?
Why this matters: Proportional indexation under s294-40 is based on the highest unused % at each general cap rise. ATO records may not reflect the correct indexation if pension use history is complex (e.g. commutations, reversionary pensions). Verification is often owed.
If I'm over my personal TBC, what is my recommended commutation strategy — which tranche, when, and what does it do to my accumulation phase tax?
Why this matters: Commutation moves the excess from 0% pension to 15% accumulation. Which tranche to commute (oldest, smallest, or specific asset) has implications for future cap room, and whether re-contribution is possible later.
Can we combine my and my spouse's Transfer Balance Caps via contribution splitting or withdrawal/recontribution — and what's the multi-year plan?
Why this matters: Spouse balance equalisation is often the biggest lever available but requires multi-year modelling: contribution caps, preservation rules, condition-of-release timing, and personal cap utilisation on both sides.
Also relevant
The Transfer Balance Cap controls your pension phase. Division 296 applies to your TOTAL Super Balance. Members over $1.9M pension AND over $3M TSB are exposed to both regimes simultaneously. Modelling them together reveals the actual household tax picture.
Check your Div 296 exposure too →Law bar
Transfer Balance Cap rules: Each member has a PERSONAL cap set at the general cap on the day their first account-based pension commenced (ITAA 1997 s294-35). General cap 2025-26 is $1,900,000, indexed in $100,000 CPI steps. Historical: $1.6M (July 2017 – June 2021), $1.7M (July 2021 – June 2023), $1.9M (July 2023 onwards). Personal cap indexes proportionally ONLY based on highest unused percentage at each indexation event (s294-40) — members at 100% cap use get zero indexation benefit. Exceeding personal cap triggers excess transfer balance tax at 15% of ATO-calculated notional earnings (shortfall interest rate ~7%) for first excess, 30% for second and subsequent (s294-25). ATO issues automatic commutation authority forcing excess back to accumulation phase (s294-80). Pension phase earnings taxed at 0% on TBC portion (s295-385). Reversionary pensions credit to transfer balance account. Defined benefit income streams use an income-based cap rather than a balance-based cap.
ATO — Transfer Balance Cap overview ↗
www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/transfer-balance-cap
ATO — Excess transfer balance tax determinations ↗
www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/transfer-balance-cap/excess-transfer-balance
ATO — Personal transfer balance cap and indexation ↗
www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/transfer-balance-cap/personal-transfer-balance-cap
ATO — Key superannuation rates and thresholds (TBC history) ↗
www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds
General information only. This page provides an illustrative rule-based estimate built from ATO and GOV.UK guidance for April 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.