Important changes to Australia’s superannuation system are set to take effect from 1 July 2025. Here’s a straightforward guide to help you understand these updates and prepare accordingly.
1. Superannuation Guarantee (SG) Increase
From 1 July 2025, the compulsory employer superannuation contribution, known as the Superannuation Guarantee (SG), will rise from 11.5% to 12% of your ordinary time earnings. This means your employer will contribute more to your super fund, boosting your retirement savings. If you have salary sacrifice arrangements, ensure these additional contributions don’t inadvertently exceed your concessional contributions cap.
2. Transfer Balance Cap Adjustment
The Transfer Balance Cap (TBC) dictates the maximum amount you can transfer into a tax-free retirement phase account. On 1 July 2025, this cap will increase from $1.9 million to $2 million. If you haven’t yet started a retirement phase income stream, you’ll benefit from the full $2 million cap. However, if you’ve already commenced a pension, your personal cap will adjust proportionally based on your highest balance.
3. Total Super Balance (TSB) Thresholds
Your Total Super Balance affects your eligibility for certain contributions. From 1 July 2025, the TSB threshold will increase to $2 million. This adjustment may allow individuals who were previously ineligible to make non-concessional contributions or access the bring-forward arrangements.
4. Contribution Caps and Carry-Forward Rules
Concessional Contributions Cap: The cap for before-tax contributions, such as employer SG and salary sacrifice, will remain at $30,000 per year from 1 July 2025. If you have unused cap amounts from previous years and a TSB below $500,000, you can carry forward these unused amounts for up to five years, potentially allowing for larger concessional contributions in a single year.
Non-Concessional Contributions Cap: The cap for after-tax contributions remains at $120,000 annually. With the bring-forward rule, you might contribute up to $360,000 over three years, depending on your TSB. Be mindful that triggering the bring-forward arrangement locks in the cap based on the year it’s initiated, without benefiting from subsequent indexation during that period.
5. Minimum Pension Drawdowns
The government periodically reviews the minimum drawdown rates for account-based pensions. While specific changes from 1 July 2025 haven’t been detailed yet, it’s essential to stay informed about any adjustments to ensure compliance and effective retirement planning.
Preparing for These Changes
Review Your Super Strategy: Assess how the increased SG rate and contribution caps align with your retirement goals. Consider consulting a financial adviser to optimise your super contributions.
Monitor Your Total Super Balance: Keeping track of your TSB is crucial, especially if you’re approaching the new $2 million threshold, as it influences your contribution options and eligibility for certain concessions.
Stay Informed: Superannuation rules can be complex and subject to change. Regularly check updates from reliable sources like the Australian Taxation Office (ATO) or your super fund to stay abreast of any new developments.
By understanding these upcoming changes and proactively managing your superannuation, you can better position yourself for a comfortable retirement.