Australia’s transfer balance cap is $2.1 million for 2026-27. That’s the lifetime limit on how much super you can shift into the tax-free retirement phase, and it rose $100,000 on 1 July 2026 from the $2.0 million cap of 2025-26. Sounds simple — until you discover the cap that matters most isn’t the $2.1 million headline number at all. It’s your personal transfer balance cap, set the first time you start a retirement-phase pension, which may be lower than $2.1 million and can never be reset. Breach it and you’re looking at excess transfer balance tax of 15% the first time and 30% every time after that, plus a forced commutation of the excess. This guide walks through exactly how the cap works in 2026-27, with worked examples in real dollars, the mistakes that catch people out, and the planning windows the ATO’s rules actually give you.
How the transfer balance cap works in 2026-27
The transfer balance cap limits how much of your super can enjoy the zero-tax retirement-phase earnings environment. It was introduced on 1 July 2017 to stop people parking unlimited balances in tax-free pensions. Every time you move money into retirement phase — starting an account-based pension, receiving a reversionary death-benefit pension, or having a defined-benefit credit counted — a credit is recorded against your transfer balance account. Money moved back out (commutations to accumulation, lump-sum withdrawals) creates a debit.
The account is a running ledger, not a snapshot. What matters is your highest ever credit balance, not your current balance. That’s the trap most people fall into: market growth after the money is in pension phase never creates a credit, but it also never frees cap space. Your personal cap is set, effectively, the first time you enter retirement phase — and it’s the highest-ever balance against that personal cap that determines whether you’ve breached.
Key things that do not count:
- Regular pension payments — the monthly or annual income you draw from your pension is not a debit and can’t be “re-credited” later.
- Investment growth inside the pension — if your $2.1 million pension grows to $3 million, no breach has occurred. Growth is ignored for the cap.
- Transition to retirement (TTR) pensions — these are not retirement-phase income streams, so starting one creates no credit (until it converts to retirement phase, typically at age 65 or on retirement).
Transfer balance cap history
| Financial year | General transfer balance cap |
|---|---|
| 2017-18 to 2020-21 | $1.6 million |
| 2021-22 to 2022-23 | $1.7 million |
| 2023-24 to 2024-25 | $1.9 million |
| 2025-26 | $2.0 million |
| 2026-27 | $2.1 million |
A quirk worth noting: in July 2023 the cap jumped straight from $1.7 million to $1.9 million — there was never a $1.8 million step, because indexation happens in $100,000 increments tied to CPI movements, and the trigger simply landed at $1.9 million. If you come across an article claiming the cap is “$1.9 million as of 2026” — yes, at least one high-ranking guide is still saying exactly that — it’s stale. The general cap has been $2.0 million since 1 July 2025 and is $2.1 million from 1 July 2026.
For the small number of Australians with defined-benefit pensions, the related defined benefit income cap for 2026-27 is $131,250 — that’s simply the general cap divided by 16. Defined-benefit pensions don’t move money the same way, so the law deems a credit equal to your annual pension income multiplied by 16. More on that in the examples below.
Your personal transfer balance cap — step by step
Here’s the concept that does the real work. Your personal transfer balance cap is set the first time you start a retirement-phase income stream, and it equals the general cap in force at that date. It then gets proportional indexation: when the general cap rises, your personal cap rises only on the portion you hadn’t used.
- Work out your used percentage. Divide the amount you transferred into retirement phase by the general cap at that time. If you started a $1.4 million pension when the cap was $2.0 million, you used 70%.
- Work out your unused percentage. That’s 100% minus the used percentage — 30% in this example.
- Apply indexation to the unused portion only. When the general cap rises by $100,000, your personal cap rises by 30% × $100,000 = $30,000. So your personal cap becomes $2.03 million — not $2.1 million.
The brutal version: if you used 100% of your cap when you started (transferred $2.0 million under the $2.0 million cap), your personal cap is frozen at $2.0 million forever. You get none of the July 2026 indexation. That’s why some retirees who “maxed out” their pension in 2025-26 are stuck below the new headline number — and why starting slightly under the cap, when you can, preserves indexation.
You can check your personal cap in ATO online services (myGov → ATO → Super → Transfer balance cap). If your fund has reported correctly, it’s sitting right there. If you need to model what a part-time return to work, a commutation, or a reversionary pension does to your cap, the super calculator can help you sanity-check the moving parts.
Worked examples in 2026-27 dollars
Example 1: Margaret’s personal cap across the indexation
Margaret, 64, started an account-based pension in October 2025 with $1,400,000. The general cap at the time was $2,000,000.
- Used percentage: $1,400,000 ÷ $2,000,000 = 70%
- Unused percentage: 30%
- On 1 July 2026, the general cap rose $100,000 to $2,100,000
- Margaret’s indexation: 30% × $100,000 = $30,000
- Margaret’s personal cap from 1 July 2026: $2,030,000
She still has $630,000 of cap space (her personal cap of $2.03 million minus the $1.4 million she already holds in pension phase). If her unused percentage had been 0%, she’d be stuck at $2.0 million — a $100,000 difference in lifetime tax-free capacity.
Example 2: the excess, and what it costs
David started a pension in August 2026 with $2,280,000 — $180,000 over his $2.1 million personal cap. The ATO issues an excess transfer balance determination, and he must commute the excess within 60 days or the ATO will issue a commutation authority forcing his fund to do it.
Separately, excess transfer balance tax applies to the notional earnings on the excess — the earnings the excess is deemed to have made, compounding daily at (90-day bank bill yield + 7 percentage points) ÷ 365 until the excess is crystallised. Assume the excess sat for 90 days and the notional rate was roughly 10.2% per annum:
- Notional earnings: $180,000 × 10.2% × (90 ÷ 365) ≈ $4,500
- First breach: 15% × $4,500 = $675 in excess transfer balance tax
- Second and subsequent breaches: 30% — the same fact pattern the second time costs $1,350, and it keeps compounding
Two lessons: the tax itself looks small, but it applies on top of having to commute the excess, and the 30% rate means a repeated breach hurts twice as much. Get the commutation done inside the 60 days.
Example 3: the couple strategy — $4.2 million, not $2.1 million
The cap is per person, not per household. A couple where each spouse has a $2.1 million personal cap can hold $4.2 million in tax-free pension phase between them. This is where contribution splitting and spouse contributions years before retirement genuinely pay off: every dollar contributed to the lower-balance spouse’s account (rather than topping up the higher earner’s) is a dollar of future tax-free pension capacity that would otherwise be stranded in accumulation phase, where earnings are taxed at 15%.
If you’re the higher earner and your super is at $2.0 million while your spouse’s is at $400,000, splitting contributions now builds two usable caps instead of one wasted one. Our income tax calculator can help model the tax cost of the salary-sacrifice contributions you’d use to do it.
Example 4: the 30 June trap that kills your non-concessional cap
Your total super balance (TSB) on 30 June 2026 decides your non-concessional contribution (NCC) eligibility for all of 2026-27. If your TSB is $2.1 million or more, your NCC cap is zero — nothing. The bring-forward tiers for 2026-27 are:
| TSB on 30 June 2026 | NCC cap for 2026-27 |
|---|---|
| Less than $1.84 million | $390,000 over 3 years (bring-forward) |
| $1.84 million to less than $1.97 million | $260,000 over 2 years |
| $1.97 million to less than $2.1 million | $130,000 (annual cap only) |
| $2.1 million or more | Nil |
Now the trap: your TSB is $2,090,000 in late June 2026. On 28 June you make a $15,000 non-concessional contribution — a perfectly ordinary top-up. On 30 June your TSB is $2,105,000. You have just crossed $2.1 million, and your entire 2026-27 NCC eligibility is gone. That single June contribution cost you up to $130,000 of future contribution capacity. Check your TSB before making late-June contributions if you’re anywhere near the boundary.
Example 5: pension payments vs commutation — the $60,000 choice
You’ve breached your cap by $60,000 and need to bring your transfer balance account back down. Two ways to take $60,000 out of the pension:
- As regular pension payments: no debit is created. Your transfer balance account doesn’t move. The breach stays.
- As a partial commutation (lump sum): a $60,000 debit is created, reducing your transfer balance account by $60,000. The breach is cleared.
This is the single most misunderstood mechanic in the whole system: regular pension income does not reduce your cap usage. Only commutations do. When you’re managing an excess, take it as a commutation, not as pension payments. (Note the debit can never take your transfer balance account below zero, and it doesn’t increase your personal cap — it just brings the account balance back within it.)
Example 6: the reversionary 12-month planning window
When your spouse dies and a reversionary pension automatically continues to you, the credit to your transfer balance account generally arises 12 months after the date of death — not immediately. That’s a genuine planning window. Suppose you already have $1.9 million in your own pension and your late spouse’s reversionary pension is worth $600,000. In 12 months, your transfer balance account will jump to $2.5 million — $400,000 over a $2.1 million cap.
The window lets you commute part of your own pension back to accumulation (creating debits) before the reversionary credit lands, or take advice on restructuring. Without the window, the credit would hit instantly and you’d be in breach with a 60-day clock running while grieving. Don’t waste it.
Example 7: defined-benefit credit — $80,000 × 16
Tom receives a defined-benefit pension of $80,000 per year. The credit to his transfer balance account is $80,000 × 16 = $1,280,000. That leaves him $820,000 of space under a $2.1 million cap for an account-based pension alongside it. Note the defined benefit income cap of $131,250 for 2026-27 — income above that threshold is taxed less concessionally, so high defined-benefit pensions have their own separate boundary to watch.
Example 8: Division 296 meets the transfer balance cap
Priya has a total super balance of $3.2 million, with $2.1 million in retirement-phase pension and $1.1 million in accumulation. Is she in trouble?
- Transfer balance cap: fine. Only $2.1 million of credits against her $2.1 million personal cap. The $1.1 million in accumulation creates no credits, and growth on the pension doesn’t either.
- Division 296: bites. From 1 July 2026, the extra 15% tax on earnings applies to the portion of her balance above $3 million — so earnings attributable to roughly $200,000 of her balance attract the additional tax.
The two regimes measure different things: the transfer balance cap polices what’s in tax-free pension phase; Division 296 polices total balance. You can pass one and fail the other. For the full Division 296 breakdown, see our guide to Division 296 super tax in Australia.
Common mistakes
- Assuming the headline cap is your cap. If you started your pension when the general cap was $1.9 million and used all of it, your personal cap is $1.9 million — $200,000 below today’s headline number.
- Taking pension payments to fix a breach. As Example 5 showed, only commutations create debits. Regular payments leave the breach untouched.
- Panic-selling when growth pushes a pension past $2.1 million. Growth after the credit is irrelevant. A $2.1 million pension that grows to $3 million has not breached anything.
- The late-June NCC that trips the TSB test. One contribution on 28 June can zero out a full year of non-concessional eligibility.
- Ignoring the fund’s reporting. Your transfer balance account is built from what your fund reports to the ATO. Wrong values in, wrong cap position out — check it in ATO online services.
- Trusting stale guides. Anything quoting “$1.9 million as of 2026” hasn’t been updated since the July 2025 indexation, let alone July 2026.
- Forgetting the transfer balance cap isn’t the only ceiling. Division 296, the NCC caps, and the defined benefit income cap all run on their own tracks.
Tips for 2026-27
- Leave a buffer when you start. Commencing a pension at 95% of the cap instead of 100% preserves indexation on the unused 5% — free lifetime cap space.
- Equalise spouses early. Contribution splitting and spouse contributions in your 40s and 50s build two full $2.1 million caps instead of one stranded balance.
- Diary the reversionary date. The 12-month window after a spouse’s death is the most valuable planning period the rules give you — use it to commute and restructure before the credit lands.
- Commute, don’t just draw, when managing an excess. Only commutations reduce the transfer balance account.
- Check your TSB in mid-June before any late-June non-concessional contributions near the $2.1 million boundary.
- Reconcile your fund’s reporting annually. A misreported pension commencement value can manufacture a phantom breach — or hide a real one.
- Model the whole picture. The transfer balance cap interacts with contribution caps, withdrawal tax, and death benefits — see our guides on super contribution caps for 2026-27, super withdrawal tax, and super death benefits tax.
Frequently asked questions
Does investment growth inside my pension breach the cap?
No. Credits are only created when money moves into retirement phase. Once it’s there, growth is ignored for transfer balance purposes. A pension that started at $2.1 million and grows to $3 million has not breached — and you don’t need to commute the growth out.
Can I transfer my unused transfer balance cap to my spouse?
No — the cap is strictly personal and non-transferable. If you die with unused cap space, it dies with you. The practical workaround is lifetime planning: contribution splitting and spouse contributions while you’re both alive build up both spouses’ balances, so each of you can use your own $2.1 million cap.
What if my fund reported the wrong value to the ATO?
Your transfer balance account is only as accurate as your fund’s reporting. If the commencement value is wrong, your cap position is wrong — you could be flagged for a breach that never happened, or miss a real one. Contact your fund to correct the reporting, then check that the correction flows through in ATO online services (myGov). Keep the fund’s written confirmation; if a determination is issued on bad data, you’ll need it to have it revoked.
What happens if I ignore an excess transfer balance determination?
You have 60 days to commute the excess after the determination issues. If you don’t, the ATO issues a commutation authority directly to your fund, forcing the release — you lose control of which pension is commuted and when. The excess transfer balance tax on the notional earnings applies regardless. Ignoring it is the worst option on every axis.
Does starting a transition to retirement pension use my cap?
No. A TTR pension is not a retirement-phase income stream, so starting one creates no credit against your transfer balance account. The credit only arises if and when it converts to retirement phase (for example, when you turn 65 or notify the fund of retirement). This is a genuine timing tool: you can be drawing a TTR pension while your transfer balance cap sits completely untouched.
Can I start a second pension after commuting the first?
Yes — commuting creates a debit, and you can commence a new pension later. But your personal cap never resets: the new pension’s credit is measured against the same personal cap, and it’s your highest ever balance that counts for breach purposes. Commuting and restarting doesn’t launder a breach away.
The bottom line
The transfer balance cap for 2026-27 is $2.1 million — but the number that governs your retirement is your personal cap, set the day you first entered retirement phase and indexed only on what you left unused. The people who get this right do three things: leave a buffer when they commence, equalise balances between spouses years in advance, and treat commutations — not pension payments — as the lever that moves the account. The people who get it wrong usually discover the rules from a determination letter, with 60 days on the clock. Check your position in ATO online services now, while it’s still a planning exercise rather than a compliance one. The ATO’s own guidance is at ato.gov.au.
