Superannuation Thresholds Rise to $2 Million: What has changed this financial year?
- Josh Tilley
- Jul 28
- 2 min read
From the new financial year, two key superannuation limits move higher thanks to CPI indexation. While inflation erodes purchasing power, it also pushes these thresholds up, opening extra planning opportunities.
1. Higher Balance Test
Total Super Balance (TSB) test: From 1 July 2025, you can still make non-concessional (after-tax) contributions provided your 30 June balance is below $2 million (up from $1.9 million).
2. Transfer Balance Cap has climbed to $2 Million
The Transfer Balance Cap (TBC) limits how much you can shift into a tax-free retirement-phase pension:
Date | General TBC |
1 July 2017 | $1.6 m |
1 July 2021 | $1.7 m |
1 July 2023 | $1.9 m |
1 July 2025 | $2.0 m |
Proportional indexation still applies. If you have already used part of your cap, only the unused percentage is indexed.
Example: Jess commenced a retirement pension in 2023 with $1.2 m, using 63 % of the then $1.9 m cap. On 1 July 2025 her personal TBC rises by 37 % of the $100 000 indexation—i.e. $37 000—giving her a new personal cap of $1 937 000.
3. Growth Inside Existing Pensions Stays Unlimited – but Watch the Pending $3m Tax
The TBC only tests what you originally transfer; subsequent investment earnings can still compound tax-free.
Illustration: A retiree aged 70 with $1.6 m invested, earning 9 % p.a. and drawing the minimum 5 % pension, could see the balance rise to about $1.664 m over a year—even without extra cap space.
That said, the draft Division 296 legislation would apply an additional 15 % tax on the share of annual earnings attributable to any total super balance above $3 million from 1 July 2025 if it becomes law. Very large balances should factor this into forward planning.
4. Three Situations Needing Careful Advice
Yet to start a pension
Partially used caps & new cash windfalls
Transition-to-Retirement (TTR) pensions converting to full pensions
5. Practical Next Steps
Review your projected 30 June balance to confirm eligibility for after-tax contributions.
Check your personal TBC usage in ATO Online; note the percentage already used.
Time large non-concessional contributions—bring forward up to $360 000 if comfortably under the new $2 m TSB.
Model fund earnings and withdrawals for those already in full pension mode; ensure minimum drawdowns align with cashflow needs.
Consider the $3 m rule in projections for high-balance members; alternatives (family trusts, investment companies) may mitigate future tax drag.
Seek advice from us if you expect sizeable capital gains, inheritances, or a TTR conversion in the next 12 months.
Key Take-away
The lift to a $2 million balance test and a higher TBC widens the window for tax-free retirement income but the benefits hinge on proportional indexation, timing, and the still-pending $3 million balance tax. A quick pre-year-end review could translate into thousands of dollars in extra tax-free earnings for years to come.
Need guidance? Contact Accord Accountants & Advisors for a superannuation health check.
