Yet again, another financial year has passed, and a new one has just knocked on our door along with changes.
The latest superannuation changes include:
- an increase in the Superannuation Guarantee Contribution rate (SGC);
- the imposition of the new payday super measures;
- increasing the visibility of the Australian Taxation Office (ATO) over unpaid super;
- the reduction of tax concessions for individuals with more than $3 million in super;
- pension payment drawdown minimum.
The changes in a nutshell
Super payments from employers
It is proposed that, from 1 July 2026, employers will be required to pay employees’ super at the same time they pay their wages. Currently, employers are only required to pay superannuation on at least a quarterly basis. This measure will enable employees to check the payment of their superannuation entitlements more easily, and to benefit from higher compounding returns given their super will be paid more frequently.
Increasing ATO’s visibility over unpaid super
The Federal Government has allocated $27 million to the ATO to improve data capabilities – including matching employer and super fund data to identify instances of underpayment of SGC by employers. An additional $13.2 million has been allocated to the ATO to consult and co-design a new compliance system that will proactively identify instances of underpayment of SGC. Employers should be aware that the ATO will have more resources to detect non-compliance with the superannuation guarantee regime.
Reduced tax concessions for individuals with more than $3 million in super
From 1 July 2025, individuals with a super balance exceeding $3 million will be subject to an additional 15% tax on investment earnings on the portion of their super balance which exceeds $3 million. This means that the headline tax rate will increase from 15% to 30%, for earnings corresponding to the portion of an individual’s superannuation balance that is greater than $3 million. Earnings on assets below the $3 million threshold will continue to be taxed at 15% if held in an accumulation or defined benefit account, and 0% if held in a retirement pension account.
The $3 million threshold is not expected to be indexed, and the ‘Better Targeted Superannuation Concessions’ measures are only expected to impact a modest number of individuals.
The Super Guarantee has risen from 10.5% to 11% this financial year, seeing $330 a year flow into workers’ super accounts. It will then continue to rise in 0.5% increments annually to reach 12% by 2025. This will be mainly beneficial to younger workers on lower incomes who have years left in the workforce to watch the compounding interest grow.
Removal of temporary reduction in minimum drawdown rates
The temporary 50% reduction of the minimum pension drawdown rates, which were introduced in the COVID-19 pandemic, ended on 30 June 2023. From 1 July, the standard Government minimum drawdown rates will apply which start at 4% for a person under 65, rising to 5% once they turn 65, then gradually increasing in five-year intervals to 14% when a person turns 95.
Total super balance cap
The total super balance cap has increased from $1.7 million to $1.9 million meaning investors cannot make additional non-concessional contributions (post-tax) to their super once their balance has passed $1.9 million.
If an individual is eligible for a Government co-contribution, they can receive an additional super contribution from the Government. From 1 July, if a person earns between $43,445 and $58,445 and pays extra into their super, they may now be eligible for Government contributions to their super fund. This is up from $42,016–$57,016. The maximum entitlement remains unchanged at $500.
Reach out to your Financial Adviser at Alman Partners for further clarification if you have any concerns regarding these changes.
Veronika Holubova (MFinP, GradCertFP, ADFP, DipFP) is an Authorised Representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.