Defined Benefit Income Cap Calculator
Whether your defined benefit pension is over the defined benefit income cap for the income year, by how much, and what that costs: the extra assessable income taxed at your marginal rate and the reduction of the 10% offset on an untaxed element.
The defined benefit income cap is the general transfer balance cap divided by 16.
How the defined benefit income cap calculator works
The defined benefit income cap is the general transfer balance cap divided by 16. Add up the taxed, untaxed and tax-free components of your defined benefit income; the excess over the cap is split in proportion. On the taxed and tax-free share, half the excess is added to your assessable income and taxed at your marginal rate. On the untaxed share, the usual 10% tax offset is reduced by 10% of the excess, floored at zero.
Formula: Cap = general TBC ÷ 16 · excess = max(0, income − cap) · assessable addition = 50% × excess × (taxed + tax-free) ÷ income · offset reduction = min(10% × untaxed, 10% × excess)
Where these figures come from
The cap, the ÷16 formula and the tax treatment of capped defined benefit income streams all come from Australian Taxation Office guidance — principally "Transfer balance cap – capped defined benefit income streams" and the ATO's own Defined benefit income cap tool, both published at ato.gov.au. The general transfer balance cap figures ($1.6m, $1.7m, $1.9m, $2.0m and $2.1m from 1 July 2026) are the ATO's published indexed caps.
- Defined benefit income cap and the ÷16 formula — ATO, Transfer balance cap: capped defined benefit income streams.
- General transfer balance cap and its indexation — ATO, Transfer balance cap.
- 50% assessable-income rule and the reduced 10% offset — ATO, Tax on capped defined benefit income streams.
- Component splits (taxed element, untaxed element, tax-free component) — your fund's PAYG payment summary — superannuation income stream.
Last checked: July 2026. The cap is reviewed each year after the ATO confirms whether the general transfer balance cap has indexed on 1 July. This page is general information and an estimate only — it is not tax advice, and it does not take your circumstances into account.
Understanding your resultSelect the question that matches where you are right now.
The result shows how far your capped defined benefit income sits above or below the cap for the income year you chose, and what that gap does to your tax.
The excess is the number that mattersNothing happens to the income below the cap. Only the amount above it drives the 50% assessable addition or the offset reduction.
It's not a penaltyGoing over the cap doesn't create a separate bill. It changes the tax treatment of income you already receive.
What it is notNot tax advice, and not a projection of your pension. It's an estimate of a threshold's effect for one income year.
The answer hinges on your component split, and that's the input people most often get wrong.
Find your PAYG payment summaryYour fund issues a PAYG payment summary for the superannuation income stream each year. It shows the taxed element, untaxed element and tax-free component separately.
Unfunded scheme? Expect an untaxed elementCSS, PSS and State Super pensions are typically untaxed element, sometimes with a smaller taxed or tax-free portion alongside.
Add up every capped streamThe cap is assessed against your total capped defined benefit income for the year across all funds — not per pension. If you receive two, add them together before comparing to the cap.
Once you know where you sit, these are the sensible next steps.
Cross-check with the ATO toolThe ATO publishes its own Defined benefit income cap tool. For a mixed taxed/untaxed stream in particular, it's worth confirming there.
Recheck next 1 JulyThe cap moves with the general transfer balance cap. A year where you were just over can become a year where you're under.
Talk to a tax agentIf you're near the cap, or it's the first year of a pension or a reversionary pension, the interaction with your other income is worth professional advice.
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The defined benefit income cap for 2026-27 $131,250
The defined benefit income cap is $131,250 for the 2026-27 income year. It's set at the general transfer balance cap divided by 16 — and the general cap indexed from $2.0 million to $2.1 million on 1 July 2026, lifting the income cap from $125,000. The cap applies to capped defined benefit income streams for people aged 60 and over (or death benefit recipients where the deceased was 60 or over).
| 2026-27 cap | $131,250 |
|---|---|
| General TBC | $2.1m |
| Formula | TBC ÷ 16 |
- Was 2025-26 $125,000
- Indexed With the TBC
How the cap is worked out General TBC ÷ 16
There's no separate indexation for the defined benefit income cap — it's simply the general transfer balance cap divided by 16. So when the general cap steps up by $100,000 (it indexes in $100,000 increments in line with CPI), the income cap rises by $6,250. That's why the figure moves in odd-looking steps: $100,000, then $106,250, $118,750, $125,000 and now $131,250. Knowing the formula means you can work out the cap for any year yourself.
| Formula | TBC ÷ 16 |
|---|---|
| TBC step | $100,000 |
| Cap step | $6,250 |
- No separate Indexation
- Moves with The general cap
The cap year by year $100,000 → $131,250
The cap has risen four times since the rules began on 1 July 2017: $100,000 for 2017-18 to 2020-21 (TBC $1.6m), $106,250 for 2021-22 to 2022-23 ($1.7m), $118,750 for 2023-24 to 2024-25 ($1.9m), $125,000 for 2025-26 ($2.0m), and $131,250 for 2026-27 ($2.1m). If you're amending an earlier return or checking a past assessment, use the cap for that income year — not the current one.
| 2017-18 to 2020-21 | $100,000 |
|---|---|
| 2023-24 to 2024-25 | $118,750 |
| 2026-27 | $131,250 |
- Past years Use that year's cap
- Switch year In the calculator
Taxed or tax-free income over the cap 50% of the excess is assessable
If your defined benefit income is a taxed element, a tax-free component, or both, then 50% of the amount above the cap is added to your assessable income and taxed at your marginal rate. On $150,000 of income in 2026-27 the excess is $18,750, so $9,375 is added to your assessable income — at a 39% marginal rate (including Medicare) that's roughly $3,656 of extra tax. The other half of the excess keeps its concessional treatment.
| $150,000 income | $18,750 over |
|---|---|
| Assessable addition | $9,375 |
| Rule | 50% of the excess |
- Half the excess Stays concessional
- Taxed at Your marginal rate
Untaxed element over the cap The 10% offset gets cut
Unfunded public-sector pensions (CSS, PSS, State Super and similar) pay an untaxed element. That's fully assessable as normal, but you'd usually get a 10% tax offset on it. Exceed the cap and that offset is reduced by 10% of the excess, and it can't fall below zero. On $150,000 of untaxed income in 2026-27, the offset drops from $15,000 to $13,125 — the $1,875 of lost offset is the actual cost of being over the cap.
| Normal offset | 10% of income |
|---|---|
| $150,000 example | $15,000 → $13,125 |
| Reduction | 10% of the excess |
- Hits hardest CSS, PSS, State Super
- Offset floor Zero
If you're under the cap Nothing changes
Below the cap there's no additional assessable income and no reduction to the 10% offset on any untaxed element — your defined benefit pension is taxed the way it always was. Because the cap indexes with the general transfer balance cap, some people who were just over it in one year fall back under it the next without changing anything: the cap rose $6,250 on 1 July 2026. It's worth rechecking each year rather than assuming last year's answer still holds.
| Under the cap | No extra tax |
|---|---|
| Offset | Unaffected |
| Cap rose | $6,250 in 2026-27 |
- Recheck Each year
- Indexation Can pull you under
Who this actually affects Large DB pensions, 60+
The cap only bites on capped defined benefit income streams above roughly $131,000 a year, so it affects a relatively small group: long-serving members of older public-sector schemes like CSS, PSS and State Super, some judges and senior public servants, and members of older corporate defined benefit funds. It applies from age 60 (or to a death benefit where the deceased was 60 or over). Under-60 recipients, child recipients and structured settlement streams follow different rules.
| Threshold | ~$131k/yr |
|---|---|
| Typical | CSS, PSS, State Super |
| Age | 60+ |
- Under 60 Different rules
- Small group But high value
Worked examples
| Inputs | Amount over the cap | Note |
|---|---|---|
| $150,000 taxed element in 2026-27 at a 39% marginal rate | $18,750 | $18,750 over the $131,250 cap; $9,375 assessable, $3,656 extra tax |
| $120,000 untaxed element in 2025-26 | $0 | under the $125,000 cap — the full $12,000 offset stands |
| A mix: $100,000 taxed and $50,000 untaxed in 2026-27 | $18,750 | $18,750 over; the offset is cut by $1,875 |
The sources behind this calculator
- ATO — Transfer balance cap — the general transfer balance cap by income year, from which the defined benefit income cap is derived (÷ 16)
- ATO — Income streams from a capped defined benefit — how income over the cap is treated: 50% of the excess on taxed and tax-free components becomes assessable; the 10% offset on the untaxed element is reduced
- Australian Taxation Office — administers the transfer balance cap and the defined benefit income cap
Last checked: September 2026. Caps are indexed to CPI in $100,000 steps of the general transfer balance cap and are verified against the ATO each July.