Advanced pre‑retirement planning (2025–26) for Australians with $1.5m+ in super

At a glance (2025–26 settings)

• General Transfer Balance Cap (TBC): $2.0 million from 1 July 2025 (maximum that can move into tax‑free pension retirement phase, per person).
• Amounts above your available TBC generally remain in accumulation phase (earnings taxed up to 15% inside super). Check if worth keeping in accumulation, this will be determined by your potential taxable income, if your marginal tax rate is under 15% it might be worth removing from the accumulation account to avoid paying 15%
• Concessional contributions cap: $30,000 per year (includes employer SG).
• Non‑concessional contributions cap: $120,000 per year (bring‑forward rules may allow up to $360,000, subject to Total Super Balance (TSB) thresholds).
• Downsizer contributions: up to $300,000 per person from age 55 (eligibility rules apply); does not count toward non‑concessional caps.

Who this article is for

• Pre‑retirees aged ~55–65 with super balances of ~$1.5m to $4.0m+ (single or couple).
• Self‑funded retirees or those unlikely to qualify for the Age Pension.
• Clients who want a technically sound plan that reduces tax leakage and improves flexibility.

What “good” looks like for high‑balance clients

• You maximise tax‑free pension phase across both spouses (where relevant), while keeping accumulation exposure as low as practical.
• You avoid locking in a permanently lower personal TBC through poor timing.
• You preserve contribution flexibility by managing 30 June Total Super Balance thresholds.
• You improve estate outcomes (including managing taxable vs tax‑free components).
• You use the final 5–10 working years as a deliberate sequencing window — not a last‑minute event.

Key numbers summary

Item	2025–26 setting (as referenced here)	Why it matters
Transfer Balance Cap (general)	$2.0m from 1 July 2025	Sets the maximum per person that can move into tax‑free pension phase.
Concessional contributions cap	$30,000 p.a.	Controls deductible/SG contributions; major lever to reduce personal tax in final working years.
Non‑concessional contributions cap	$120,000 p.a. (bring‑forward may apply)	Used for after‑tax contributions and spouse equalisation; depends on TSB thresholds.
Downsizer contribution	$300,000 per person (from age 55)	Structural tool for spouse equalisation and retirement funding; not counted under NCC cap.
Accumulation earnings tax	Up to 15% on earnings	Tax leakage for balances that cannot enter pension phase.
Pension phase earnings tax	0% on earnings (within cap)	Primary reason to optimise pension commencement and spouse equalisation.

Step 1: Understand how the $2.0m Transfer Balance Cap works

The Transfer Balance Cap limits how much you can move into the tax‑free retirement phase (generally via an account‑based pension). Once you start a pension, the ATO tracks a Transfer Balance Account that records credits (pension commencements) and debits (commutations).

• The general cap is $2.0m from 1 July 2025, but your personal cap depends on how much you have previously used.
• Indexation of the cap is generally proportional: if you partially use your cap before later indexation, you may only receive a proportion of future increases.
• A common mistake is commencing a pension without first modelling whether timing and sequencing could preserve more cap capacity.

Step 2: Manage 30 June Total Super Balance (TSB) to protect flexibility

Your Total Super Balance at 30 June can determine whether you can use key contribution strategies in the following year. For high‑balance clients, it is often the biggest gatekeeper to flexibility.

• TSB thresholds can restrict non‑concessional contributions and bring‑forward eligibility.
• Planning should be done before 30 June. Once a threshold is missed, lost flexibility can be hard to recover.

Step 3: Sequence contributions in the final working years

Concessional contributions (cap $30,000 p.a. including SG) are often the highest‑impact lever for high‑income earners. The goal is to shift income from personal marginal tax rates into the concessionally taxed super environment — while staying within caps.

• Confirm employer SG early to avoid accidental cap breaches.
• Time salary sacrifice so contributions actually land in the intended financial year.
• If eligible, review unused concessional caps and whether to use them now versus later.

Step 4: Spouse equalisation (couples) — often the highest‑value structural move

If one spouse is near or above $2.0m while the other is well below it, the household can suffer long‑term tax leakage because more money is trapped in accumulation.

Common equalisation levers include:

• Redirecting concessional contributions to the lower‑balance spouse (where appropriate).
• Non‑concessional contributions to the lower‑balance spouse (subject to TSB and cap eligibility).
• Contribution splitting (where applicable).
• Strategic use of downsizer contributions to support the lower‑balance spouse.

The objective is to maximise how much of the household can sit in tax‑free pension phase across both spouses over time.

Step 5: Pension commencement timing — avoid locking in a worse outcome

Starting an account‑based pension is not just administration — it can lock in your personal TBC utilisation profile. Timing should be decided after modelling.

• Confirm your available personal TBC before commencement (including any prior pensions/commutations).
• Model the cost of leaving funds in accumulation (15% earnings tax) versus pension phase (0% earnings tax).
• For couples, decide which spouse should commence first and how much each should transfer, based on cap availability and balance targets.

Step 6: Component planning (re‑contribution strategy) for estate outcomes

Super is made up of taxable and tax‑free components. While withdrawals after age 60 are generally tax‑free to you personally, death benefits paid to certain beneficiaries (e.g., non‑dependant adult children) may be taxed on the taxable component.

A re‑contribution strategy (withdraw then re‑contribute within contribution rules) can convert taxable components into tax‑free components, improving estate outcomes.

• This strategy must be sequenced within contribution caps and TSB thresholds.
• It should be coordinated with pension commencements, spouse equalisation and estate planning.

Step 7: Downsizer contributions as a structural tool

Downsizer contributions (up to $300,000 per person from age 55, eligibility rules apply) are particularly valuable for high‑balance clients because they:

• Do not count toward the non‑concessional contribution cap.
• May be available even when other contribution options are restricted by TSB.
• Can be directed strategically to support spouse equalisation and retirement structuring.

Step 8: Quantify the tax leakage — a simple 10‑year model

Accumulation tax leakage is often underestimated because it looks small ‘per year’. The compounding effect over 10–20 years is what matters.

Illustration (simplified):

• Household super: $3.2m
• Assume $2.0m in pension phase (0% earnings tax) and $1.2m in accumulation (15% earnings tax).
• Assumed earnings: 6% p.a.

Accumulation earnings: $1.2m × 6% = $72,000 per year. Tax at 15% = $10,800 per year (before offsets such as franking credits).

Over 10 years, that is $108,000 of tax paid — and importantly, $108,000 that no longer compounds. Across longer retirements and larger balances, structural optimisation can preserve substantially more.

Implementation checklist

1. Confirm super balances by account and by spouse (including any SMSF interests).
2. Check Transfer Balance Account history (if any prior pensions) and confirm available personal TBC.
3. Calculate 30 June Total Super Balance and identify which strategies it enables or blocks next year.
4. Review concessional contribution capacity (including SG) and determine salary sacrifice settings.
5. If a couple, set a target balance position and map steps over 12–36 months.
6. Model pension commencement timing and projected accumulation tax leakage if no action is taken.
7. Review taxable vs tax‑free components and whether re‑contribution improves estate outcomes.
8. If downsizing is likely, plan sale timing and downsizer contribution sequencing (and which spouse receives it).
9. Check taxable income and determine best strategy to avoid paying 15% inside Super accumulation accounts.

Common high‑balance questions

Can I move more than $2.0m into pension phase?

Not under the general cap, per person. Amounts above your available personal cap generally remain in accumulation.

If my spouse has a smaller balance, does that help?

Often yes — materially. Two spouses can each access their own cap and pension tax treatment, so spouse equalisation can be a high‑impact strategy.

Is downsizer only useful if I’m under contribution caps?

Not necessarily. For high‑balance clients, downsizer can be valuable because it does not count toward the non‑concessional cap and can support spouse equalisation.

Do I need advice for this?

These strategies interact. Most value comes from correct sequencing, accurate implementation and planning around key dates (particularly 30 June).

How EPG Wealth can help

EPG Wealth specialises in strategic retirement advice for pre‑retirees and self‑funded retirees with complex circumstances and substantial super balances. Our focus is on structure, sequencing and implementation — designed to reduce tax leakage, maximise retirement flexibility and improve estate outcomes.

If you are within 5–10 years of retirement and your super is approaching (or above) the $2.0m cap, a structured plan can make a material difference. Click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

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Disclaimer: This information is general in nature and does not take into account your objectives, financial situation or needs. Before acting, consider whether it is appropriate for you and seek personal advice.