2025 Transfer Balance Cap increase: What you need to know!
BGL Corporate Solutions (BGL) have offered their expert insights on the upcoming Transfer Balance Cap (TBC) increase and its implications for SMSF professionals and trustees.
From 1 July 2025, the general Transfer Balance Cap (TBC) will increase from $1.9 million to $2 million due to CPI growth over the past 2 years. This change impacts individuals with retirement-phase income streams, making it crucial for SMSF professionals to ensure their clients remain compliant while maximising strategic opportunities.
The TBC limits the superannuation savings that can be transferred into a tax-free retirement account. This increase allows retirees to increase the amount of their tax-free pension, representing an opportunity for SMSF professionals to proactively explore advanced strategies to optimise tax benefits and enhance retirement income, such as:
- Delaying pension commencement: Individuals nearing retirement may benefit from waiting until after 1 July 2025 to commence their pension, allowing more assets into the tax-free retirement phase.
- Super equalisation and contribution splitting: If one spouse’s balance approaches $2 million while the other’s balance is lower, strategic planning could optimise tax advantages.
“The increase in the Transfer Balance Cap presents a significant opportunity for SMSF trustees and professionals to reassess their retirement strategies,” said Jeevan Tokhi, General Manager of Product at BGL, CPA (SMSF Specialist) and accredited SMSF Specialist Advisor (SSA). “With more funds now moving into the tax-free pension phase, now is the perfect time for professionals to review client accounts and ensure they maximise the benefits. Updates to BGL’s Simple Fund 360 SMSF administration software will reflect these changes, ensuring accurate reporting, compliance and efficiency for our clients.”
Key Considerations for SMSF Professionals:
- Maximise retirement savings: Review clients’ current and projected transfer balance positions and advise on pension commencement timing and Non-Concessional Contributions (NCC) opportunities.
- Leveraging the higher cap: Retirees starting a retirement phase income stream on or after
- BGL software updates: Those who have already commenced a retirement income stream will have a personal TBC that varies based on their previous cap. BGL’s Simple Fund 360 software will automatically calculate the new indexed cap.
- Ensure compliance: Stay on top of Transfer Balance Account Reports (TBAR) obligations, which can be easily prepared in BGL’s Simple Fund 360 software.
- Consider Estate Planning: The TBC increase also affects death benefit pensions, influencing how transfer balance accounts are calculated.
The TBC increase affects contributions, with the Total Superannuation Balance (TSB) test determining Non-Concessional Contributions (NCC) eligibility. While Concessional and NCC caps remain unchanged, the three-year bring-forward rule applies to a higher TBC. SMSF professionals should consider delaying NCCs until after 1 July 2025 for larger contributions.
“BGL remains committed to keeping SMSF professionals ahead of regulatory changes. With our software solutions continuously updated to reflect legislative shifts, our clients can confidently navigate compliance and optimise financial outcomes,” concluded Tokhi.
These are BGL’s views and should not be construed as financial advice. BGL recommends that any fund member looking to set up a pension or vary a pension seek the appropriate financial advice.
