The $1.9 million transfer balance cap: what SMSF members in pension phase need to know

The transfer balance cap is a lifetime limit on how much super each individual can move into the tax-free retirement phase. For 2025–26 the general cap is $1.9 million. SMSF trustees who are paying or starting an account-based pension need to understand how the cap applies — both for their members and for the fund's reporting obligations.

What counts toward the cap

Amounts that are 'credited' to your transfer balance account include the value of new retirement-phase income streams when they start, and certain reversionary pensions inherited from a deceased member. 'Debits' include commutations back to accumulation, structured settlements, and certain losses. Earnings inside the pension don't count — once a pension starts, growth is not pushed back against the cap.

Your personal transfer balance cap

Each individual has their own personal transfer balance cap. It starts at the general cap on the day you first start a retirement-phase income stream. If indexation increases the general cap later, you only get a proportional increase — based on the highest percentage of your cap you've ever used. Members who maxed out their cap at $1.6m back in 2017 don't get any further indexation; partial users get a partial increase.

What happens if you exceed the cap

If your transfer balance account exceeds your personal cap, the ATO issues an excess transfer balance determination. You'll need to commute (move back to accumulation phase, or out of super entirely) the excess amount, and excess transfer balance tax will be assessed on the notional earnings.

TBAR — the SMSF reporting obligation

Since 1 July 2023, all SMSFs report transfer balance events using the Transfer Balance Account Report (TBAR) on a quarterly basis — by 28 days after the end of the quarter in which the event occurs. Events to report include starting a new retirement-phase pension, full or partial commutations, and certain LRBA payments. Late or missing TBAR lodgements can attract penalties.

Indexation history

• 1 July 2017 — general cap introduced at $1.6m
• 1 July 2021 — indexed to $1.7m
• 1 July 2023 — indexed to $1.9m
• Future indexation occurs in $100,000 increments tied to CPI

Source: Australian Taxation Office — Transfer balance cap and TBAR (ato.gov.au). Always confirm your personal cap via ATO online services before starting or commuting a pension.