By Mark Churchmichael, Head of Tax & Compliance

The Australian superannuation landscape is set to undergo several significant changes from 1 July 2025. These changes will impact various aspects of super, from contributions to retirement income streams and even parental leave. Here’s a breakdown of 8 key changes and how they might affect you:

1. Earnings Tax for Super Balances Over $3 Million (Proposed Division 296 tax): The government has announced its intention to apply an additional 15% tax on earnings for superannuation balances exceeding $3 million, bringing the total tax rate on these earnings to 30%. This measure is not yet passed into law.

• How it affects you: If your super balance is, or is projected to be, above $3 million, this proposed tax could significantly impact your retirement savings. The tax is measured on your Total super balance (TSB) and considers unrealised capital gains on assets, even if they have not been sold. This is not indexed for inflation or wages growth. The tax on those gains are not refunded in subsequent years if those unrealised gains turn into losses.
• How is it paid: It can be paid by the fund or alternatively by the member individually.
• How to manage (and potentially avoid it): If you are nearing the $3 million threshold consider investing funds outside of superannuation for example family trust, Companies, or other structures where these penalty taxes may not apply. You can hold these in your own name (if you have a lower tax threshold). Professional advice is essential.
• Pitfalls: Realising or selling or transferring them may have tax consequences such is income tax, stamp duty. Professional advice to help you navigate this is a must.

2. Superannuation Guarantee (SG) Increase: The mandatory Superannuation Guarantee (SG) rate, which is the percentage of your ordinary time earnings your employer must pay into your super fund, will increase from 11.5% to 12%. This marks the final step in the legislated gradual increases.

• How it affects you: If you’re an employee, this means more money going into your super, boosting your retirement savings. For employers, it means reviewing payroll systems to ensure the correct rate is applied.

3. Higher Transfer Balance Cap (TBC): The general Transfer Balance Cap, which is the maximum amount you can transfer from your accumulation super account into a tax-free retirement pension account, will increase from $1.9 million to $2 million.

• How it affects you: If you’re planning to start a retirement pension on or after 1 July 2025, you’ll be able to transfer a higher amount into the tax-free pension phase. If you’ve already started a pension, you may be eligible for a proportional increase based on your unused cap space.

4. Increased Total Super Balance (TSB) Threshold: The Total Super Balance (TSB) threshold, which determines your eligibility for certain superannuation concessions, will also increase from $1.9 million to $2 million.

• How it affects you: This increase can make you eligible for concessions you might have previously missed out on, such as non-concessional contributions (after-tax contributions), the bring-forward rule for non-concessional contributions, government co-contributions, and the spouse tax offset.

5. Changes to Carry-Forward Concessional Contributions: The starting financial year for “carry-forward” unused concessional (pre-tax) contribution amounts will roll over to 2020-21. This means any unused amounts from the 2019-20 financial year will expire if not used by 30 June 2025.

• How it affects you: If you have unused concessional contributions from 2019-20, you need to consider making additional contributions before the end of the current financial year (30 June 2025) to utilize them.

6. Superannuation on Government-Funded Paid Parental Leave (PPL): For babies born or adopted on or after 1 July 2025, eligible parents receiving government-funded Paid Parental Leave will also receive an additional superannuation contribution (12% of their parental leave pay).

• How it affects you: This is a significant step towards addressing the gender super gap and will help boost the retirement savings of parents, particularly women, who take time out of the workforce for parental leave. Payments will be made by the ATO as a lump sum from 1 July 2026.

7. Decreased Maximum Super Contribution Base: For the first time in a while, the maximum super contribution base will decrease in FY26 to $62,500 per quarter (from $65,070 in 2024-25). This is the maximum ordinary time earnings an employer needs to use when calculating SG contributions.

• How it affects you: This primarily affects high-income earners and their employers. While the SG rate is increasing, there’s a cap on the amount of earnings it applies to.

8. Minimum Pension Drawdown Rates: The temporary minimum pension drawdown rates, which were halved during the COVID-19 pandemic, reverted to their normal levels from 1 July 2023 and remain unchanged for 2025-26.

• How it affects you: If you are in the retirement phase and drawing an income from your super, you will continue to draw at the standard rates based on your age.

Important Note: While these changes are anticipated and many are legislated, it’s always advisable to consult with a qualified professional at Stewart & Smith Advisory on 02 7226 1226 for personalised advice and the most up-to-date information on how these changes specifically impact your financial situation. The superannuation landscape can be complex, and individual circumstances vary greatly.