If your total superannuation balance exceeds $1.9 million (for the 2024-25 financial year), you can still keep all the funds in super, but the excess over the cap cannot be moved into a tax-free retirement pension. Only $1.9 million can be transferred to a tax-free "retirement phase" account, with the remainder staying in an accumulation account taxed at 15% on earnings.
Your excess concessional contributions are counted as personal assessable income and taxed at your marginal tax rate. You will receive a tax offset to reflect the 15% tax already paid on these contributions by the super fund. You can elect to withdraw the excess concessional contributions from your fund.
If your TSB is below the general transfer balance cap ($1.7 million from 2021–22, $1.9 million from 2023–24, $2 million from 2025–26) on 30 June of the previous financial year, you may be eligible to increase your non-concessional contributions cap by bringing forward caps from the next 1 or 2 years.
$1 million is enough for a comfortable retirement if you retire at age 65. This will provide a single person with an income of $60,000 p.a. and a couple with $77,000 p.a., including Age Pension for around 30 years, based on an investment return of 6% p.a. and 3.0% p.a. inflation.
If you exceed your cap, you will have to pay extra tax, and any excess concessional contributions you leave in super will count towards your non-concessional contributions cap.
After you retire any amounts over the cap need to be transferred into an accumulation account or withdrawn taken out as a lump sum.
In the organisation's super balance update, it found 2.5 per cent of the population have a super account of more than $1 million, as of June 2021. This represents 417,567 individuals, ASFA said, and is a 29 per cent increase from the 322,200 individuals who held over $1 million in June 2019.
For example, imagine you have $1.3 million in a 401(k) before age 60. While this is a considerable amount, a 4% withdrawal rate would only generate $52,000 per year. You'd also run the risk of running out of money by the time you turn 90.
Why does the cap exist? The transfer balance cap of $1.6 million was introduced in 2017 to limit the amount of tax-free retirement phase pensions Australians could commence from super.
Retiring at 60 with $500,000 in super is possible but challenging, depending heavily on your spending, lifestyle, and if you qualify for the Australian Age Pension. You might cover modest expenses using strategies like drawing down around $20,000 annually (using the 4% rule as a guide) plus other income, but it requires careful budgeting, potentially part-time work, and reducing living costs. A financial advisor can help tailor a plan, as $500k alone usually supports a basic to moderate retirement, not a lavish one.
The non-concessional (after-tax) contribution cap is currently $120,000 per financial year.
If your super contributions exceed the limit you may be required to pay excess contributions tax of up to 47%. The requirement to pay excess contributions tax will depend on which contribution cap you exceeded and whether or not you chose to withdraw the excess contributions from superannuation.
The maximum you can contribute is $300,000 or the sale price of your home, whichever is less. You may make more than one contribution, but the total must not exceed this maximum.
The Super Consumers Australia guide
It assumes you'll own your home and won't be paying rent or mortgage repayments once you've retired. The guide estimates a 'medium' lifestyle will cost a couple who are already retired about $60,000 per year (with a required super balance at retirement of $371,000).
This allows for an annual withdrawal of around $36,000 from age 60 to 85, covering 25 years. If $36,000 per year or $3,000 per month meets your lifestyle needs, $900k should be plenty for retirement.
A millionaire is somebody with a net worth of at least $1 million. It's a simple math formula based on your net worth. When what you own (your assets) minus what you owe (your liabilities) equals more than a million dollars, you're a millionaire.
If you exceed the cap, you are liable to pay tax on the excess transfer balance earnings (excess transfer balance tax). You also need to transfer any excess to a super accumulation account or withdraw it as a lump sum. This is called a commutation.
The US leads the world by a considerable margin, with an estimated $38 trillion in pension assets, but the market with greatest exponential growth within P7 was Australia, which reached $2.6 trillion at the end of 2024. The latter's assets increased by almost 500 per cent in the past two decades.