Tax Planning
Stretching Your Super: Understanding the Transfer Balance Cap Indexation and Personal Cap Changes
With the general transfer balance cap rising in July 2025 and personal caps being proportionally indexed, retirees and super fund members need to understand how their pensions and non-concessional caps are also affected.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What the Indexation Means
From **1 July 2025**, the **General Transfer Balance Cap (TBC)** increases from **$1.9 million to $2 million**. The Defined Benefit Income Cap (DBIC) will also increase from **$118,750 to $125,000**. This impacts pensions and retirement income those already drawing or entering pensions. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/general-transfer-balance-cap-indexation-on-1-july-2025?utm_source=openai))
For those already receiving a super pension or income stream, individuals who have **not reached their personal cap** are eligible for a proportionate increase depending on how much cap has been “used up” and highest ever transfer balance. For those commencing a pension on or after **1 July 2025**, the full **$2 million cap** applies. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/general-transfer-balance-cap-indexation-on-1-july-2025?utm_source=openai))
## Effects on Other Super Components
- The transfer cap affects non-concessional contribution caps, spouse offset eligibility, co-contributions, and ability to use bring-forward arrangements.
- A higher cap may allow different strategy for retirees or near retirees to restructure accounts or shift assets into pensions before the cap increase.
## Examples for Strategy
- **Jane** starts her pension on **5 August 2025**; she is eligible for a **$2 million personal TBC**, enabling her to convert more accumulation income into pension phase where income is tax‐free.
- **John** commenced his pension in 2022 with a transfer balance of $1.6 million; he has $300,000 unused cap. With the cap increase, his unused proportion will increase in line with cap indexing—giving him slightly more room to add.
## What to Do Now
1. Check your current and projected balance and unused cap—work with your adviser and super fund.
2. If you plan to start a pension after 1 July 2025, consider whether bringing forward conversions or adjusting assets make sense.
3. For high wealth individuals, monitor defined benefit components as those have separate caps.
4. Funds should ensure their systems report TBC events promptly so clients’ personal caps are correct.
## Compliance & Record-Keeping Notes
- Super funds must report all TBC events when they occur so indexation can be calculated correctly.
- Individuals should ensure their super statements include all pensions, prior commutations and balances.
- Advisers should accurately document commencement dates of pensions and track funds’ compliance in reporting to avoid cap misalignment.
## Conclusion
The July 2025 indexation of the transfer balance cap offers new flexibility for retirees, especially those entering pension phase after this date. For those already in retirement, unused cap portions also increase. Planning ahead ensures individuals maximize super benefits with minimal tax leakage.