How CPI impacts your Superannuation
CPI and Super: Why it matters to your retirement
If you’ve been online, opened a newspaper, jumped on social media, or walked the aisles of your local supermarket lately, you’ll have noticed there’s no escaping the talk about inflation. Inflation has become one of those words we all hear constantly, even if we’re not quite sure how it’s measured or what it actually means beyond “everything feels more expensive”.
And for most Australians, that’s how inflation shows up. Not as a percentage, but as a feeling. The feeling that your money just isn’t stretching as far as it once did.
So what’s actually going on, and why it’s not always doom and gloom.
On 28 January 2026, the Australian Bureau of Statistics released its latest inflation update. CPI data is published quarterly, and this release covered the December 2025 quarter. The data confirmed that prices, measured by the Consumer Price Index (CPI), rose 3.8 per cent over the 12 months to December 2025, up from 3.4 per cent in the previous quarter.
What that means in everyday speak is this. When the ABS says inflation is 3.8 per cent, they’re basically saying the basket of everyday stuff households typically buy costs about 3.8 per cent more than it did a year ago, on average.
That number can feel disconnected from real life because CPI is an average. Some costs, like electricity, housing and food, have gone up much more than that. Others have moved less. That’s why inflation can feel heavier than the headline number suggests.
A healthy inflation number, in the eyes of the Reserve Bank of Australia, is usually around 2 to 3 per cent over time. Low enough that prices aren’t running away, but high enough that the economy keeps ticking along.
So when inflation is sitting at 3.8 per cent, it’s above that “comfortable zone”. Which is why there’s so much commentary about cost of living and interest rates.
But there’s another impact of inflation that doesn’t get nearly as much airtime.
And that’s how inflation affects our retirement plans.
Not from a “can I afford to retire if food and fuel keep rising like this?” angle, which is completely valid, but from a strategy and structure perspective. The stuff financial advisers quietly nerd out on.
How CPI impacts our retirement plans
Inflation is usually framed as something that hurts our finances. But in the world of super, it can sometimes do the opposite.
The two main areas where this tends to show up in retirement planning are:
your contribution caps, which control how much you can put into super each year, and
the Transfer Balance Cap, which limits how much of your super you can move into the tax-free retirement phase.
These caps don’t move randomly. They’re reviewed regularly, and CPI is one of the key inputs that determines whether they increase over time.
And that’s why inflation matters for retirement planning, even if you don’t love numbers.
Contribution caps and CPI
Let’s start with contribution caps, because this one is usually easier to get your head around.
Right now, the concessional contributions cap is $30,000 per year. That’s the amount you can put into super using before-tax money. The non-concessional cap is $120,000 per year, or up to $360,000 under the bring-forward rule, assuming you meet the total super balance rules.
These caps don’t increase every year, and they don’t move automatically with inflation. They’re reviewed over time and are linked to wage growth measures. But inflation plays a role in the broader economic picture that influences when those increases happen.
Based on current inflation and economic data, there’s growing expectation that from 1 July 2026 we could see:
the concessional contributions cap increase to $32,500, and
the non-concessional cap increase to $130,000 per year, or $390,000 under the bring-forward rule.
This isn’t confirmed. We still need the full financial year data and for any change to be legislated before it becomes law. But it’s a good example of how inflation can eventually create more room inside super.
For people playing catch-up, earning more later in life, or trying to move money into a more tax-effective environment, higher contribution caps can be a genuine opportunity.
The Transfer Balance Cap in plain English
The Transfer Balance Cap is a limit on how much of your super you can move into the retirement phase, where the earnings on that money are tax free.
If you have more than the cap, it doesn’t mean you lose it. It just means anything above the cap has to stay in accumulation phase, where earnings are taxed, or be withdrawn outside the super system.
As of 1 July 2025, general Transfer Balance Cap is $2 million but based on the December 2025 CPI result, there’s a strong likelihood the cap could increase again to $2.1 million from 1 July 2026. This isn’t confirmed yet, but it’s firmly on the radar.
Now you might be reading this thinking, “That’s not me, I’m nowhere near $2 million.” Totally fair. But because it’s a lifetime cap and because super balances can grow over time (especially for couples, higher income earners, or people selling assets and contributing later), this is one of those rules that might not matter today, but could matter a lot later. Which is why it’s worth keeping an eye on, even if it feels irrelevant right now.
How this plays out in real life
This is where timing really matters.
Jon is planning to retire this financial year. He has $1.7 million in super and starts an account-based pension when the cap is $2 million.
By doing that, Jon has used 85 per cent of his cap. He still has 15 per cent unused.
If the general cap later increases by $100,000, Jon doesn’t get the full increase. He gets a portion of it, based on his unused percentage. In this case, roughly $15,000.
That means his personal cap would increase slightly, and he’d have a bit more room than he otherwise would have had.
Now compare that to Jan.
Jan retires with $2.2 million in super. She transfers $2 million into a retirement-phase pension and leaves the remaining $200,000 in accumulation.
Jan has used 100 per cent of her Transfer Balance Cap. Her unused percentage is zero.
So, if the general cap increases later, Jan doesn’t get any of that increase added to her personal cap. Her pension balance can still grow with investment returns, but she can’t move more money from accumulation into the tax-free retirement phase.
This is why the timing of when you start a pension matters.
The takeaway
Those inflation headlines are worth paying attention to. CPI isn’t just about the cost of living; it quietly influences how the super system evolves over time.
While inflation shows up most clearly in groceries, fuel and power bills, it also works behind the scenes, shaping contribution limits and retirement thresholds. Not every CPI update changes the rules, but over time, these numbers matter.
The Money Reset here: The Money Reset: Take Control of Your Money and Your Life : Mitchell, Gemma: Amazon.com.au: Books