With the recent announcement of the indexation in the General Transfer Balance cap, our minds now turn to the potential planning opportunities this change provides.

The General Transfer Balance Cap is currently $1.9m and will increase to $2m from 1 July 2025. This cap impacts several areas in relation to superannuation including:

• The amount an individual can transfer into retirement phase income streams.
• The Total Super Balance thresholds that limit non-concessional contributions to super.
• Eligibility for the Government co-contribution and spouse contribution tax-offset.

Let’s look at each of these three areas in more detail.

Retirement phase

Moving your superannuation from the accumulation phase to retirement phase involves the starting of a retirement phase income stream with your superannuation. For those starting such an income stream for the first time, the maximum you can move into a retirement pension will be $1.9m today. This is your Transfer Balance Cap. However, if you delay the start of your pension until 1 July 2025, you could move $2m into your pension.

Aside from receiving a regular income stream from your super to meet your retirement needs, the start of such a pension also renders the investment earnings attributable to those assets tax free. This enhances the after-tax return achieved by your assets and can boost the ability of your capital to meet your needs into the future.

For those who have already started a retirement phase income stream, you will not receive the full indexation of your Transfer Balance Cap. You will only receive an uplift in the unused proportion of your Transfer Balance Cap. You can find this in the ATO Online portal, which is accessed via your MyGov app.

Referred to as proportional indexation, you only receive a proportion of the uplift in the transfer balance cap. The proportion is based upon your unused cap and references the highest ever balance you have had in your transfer balance account. This means you cannot stop your pension, apply indexation, then restart your pension using the higher indexed transfer balance cap. If you are in this situation, seeking advice is recommended to ensure you maximise the tax efficiency of your retirement savings.

If you have previously used your entire Transfer Balance Cap by starting a retirement phase pension and using all the available cap at the time, then you will not receive any indexation to your personal transfer balance cap.

Contributions
Those making after-tax contributions (Non-Concessional Contributions) to super will receive a boost due to the indexation of the Transfer Balance Cap.

While the amount you can contribute has not changed from the current year, the higher balance cap will allow those with higher super balances top up further.

The following tables set out the amount you can contribute to super, both in the 2024/25 and 25/26 financial years:

2024/25 Financial Year

2025/26 Financial Year

The key strategy consideration is whether to wait until 1 July before triggering the bring-forward rule.

For example, if you have sold a property which was at one time your home, you might be considering using the downsizer contribution to put $300,000 of the proceeds into super. You have 90 days from the settlement date to make that contribution. However, if the downsizer contribution takes you over the Total Super Balance and prevents you from using the bring-forward rule to make Non-Concessional Contributions, then you might decide to make your non-concessional contributions this financial year.

Alternatively, you might want to delay making your Non-Concessional Contribution because you will be in the position of being able to put the full bring-forward amount into super, rather than a reduced amount.

Getting advice is crucial, as contributing over the Total Super Cap can cost you in tax.

Government Co-Contribution & Spouse Contribution Tax Offset

Under the Government Co-Contribution scheme, the Government matches your Non-Concessional Contributions at 50 cents in the dollar up to a maximum of $500. The co-contribution is only for those with taxable incomes less than $60,400 for 2024/25 and $62,488 for 2025/26.

You are only eligible to receive a Government Co-Contribution if your Total Super Balance is below the general Transfer Balance Cap.

Like the co-contribution, a Spouse Contribution Tax Offset is only available if you make a non-concessional contribution for your spouse and your spouse has a Total Super Balance that is below the Transfer Balance Cap. Your spouse’s income also needs to be less than $40,000 and the maximum tax offset is $540.

Indexation of the Transfer Balance Cap provides opportunities to review your superannuation contribution strategy to ensure that it is optimised. If you are considering making significant contributions to superannuation, then seeking advice from one of our highly qualified advisers would be a great starting point.