Several significant developments are causing considerable attention in the world of superannuation, and 2025 promises to be a year of potential changes. Let’s take a closer look at some of the key issues to be aware of.
$3 Million Superannuation Cap – Division 296
One of the major items on the horizon is the proposed Division 296, which introduces a “$3 million super cap.” Fortunately, the proposal was not passed by the Senate in the final sitting of 2024. Senate sittings are set to resume in February 2025, but with a federal election required before May 17, 2025, we are left awaiting news on when the election will be called and whether there will be time for Division 296 to be debated further.
It is important to note that any Bills not voted into law before an election are rendered void. Therefore, the early months of 2025 will be crucial in determining the future of this contentious issue.
What is Division 296?
If Division 296 is introduced, it would impose an additional 15% tax on earnings (including both realised and unrealised gains) on superannuation balances exceeding $3 million, effective from July 1, 2025. This change could significantly impact high-balance superannuation accounts, and if the proposal becomes law, trustees will need to act swiftly. Staying informed and flexible in strategy is essential as these changes could become law with little warning.
Non-Arm’s Length Expenditure (NALE)
At the end of the 2024 financial year, the Federal Government passed the long-awaited Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023. This legislation includes significant updates to non-arm’s length expense provisions (Schedule 7), reminding SMSF trustees of the importance of ensuring that all fund transactions are conducted at arm’s length.
What many trustees might not realize is that expenses within the fund are also considered when determining whether the fund’s income is taxable as non-arm’s length income. This means the requirement to transact at arm’s length applies not just to income but also to expenses. Non-compliance could result in significant tax penalties, including a 45% tax rate on fund income.
Objective of Superannuation
In 2024, the Superannuation (Objective) Bill 2023 was passed, establishing a clear objective for the superannuation system: “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.” This legislation ensures that superannuation is primarily aimed at providing for retirement.
While previous Liberal Governments had discussed the concept of a superannuation objective, it wasn’t until the current Labor government legislated it that the objective was officially codified. Going forward, Parliament will need to consider this objective when contemplating any changes to the superannuation system.
Superannuation Guarantee Contributions
Another significant change is the increase in the Superannuation Guarantee (SG) contribution rate, which will rise from 11.5% to 12% of an employee’s ordinary time earnings starting on July 1, 2025. While this increase benefits employees, it will place additional pressure on employers.
Here’s a quick overview of the SG contribution rates from 2002 to 2026:
| Super Guarantee Period | Rate |
| July 1, 2002 – June 30, 2013 | 9.00% |
| July 1, 2013 – June 30, 2014 | 9.25% |
| July 1, 2014 – June 30, 2021 | 9.50% |
| July 1, 2021 – June 30, 2022 | 10.00% |
| July 1, 2022 – June 30, 2023 | 10.50% |
| July 1, 2023 – June 30, 2024 | 11.00% |
| July 1, 2024 – June 30, 2025 | 11.50% |
| July 1, 2025 – June 30, 2026 and onwards | 12.00% |
Employers who fail to meet the required SG contribution rates may incur a Superannuation Guarantee Charge (SGC) from the ATO, which includes the unpaid SG amounts, interest, and administrative fees.
Tax Offset for Contributions on Behalf of Your Spouse
If you make a super contribution on behalf of your spouse, you may be eligible for a tax offset of up to $540 per year. To qualify, the contribution must be made to a complying super fund, and your spouse’s income must be below $40,000.
Eligibility requirements for the tax offset include:
- The contribution must not be deductible by you.
- Both you and your spouse must be Australian residents at the time of the contribution.
- Your spouse’s income must be below the specified threshold.
- The total super balance of your spouse must be under the $1.9 million cap (for FY2025).
- Your spouse must be under 75 years old.
The tax offset decreases as your spouse’s income exceeds $37,000, and it phases out completely when their income reaches $40,000.
Superannuation and Retirement Preparedness
New research from the Association of Superannuation Funds of Australia (ASFA) has revealed that only 30% of Australians can afford a “comfortable” retirement as defined by ASFA’s Comfortable Retirement Standard. For couples aged 65-84 who own their own home, the required super balance is at least $690,000, while singles need $595,000. This equates to $73,337 annually for couples and $52,085 annually for singles.
The report also highlights the considerable gap in knowledge and preparedness among individuals nearing retirement, emphasizing the importance of seeking expert financial advice to ensure sufficient retirement funds.
Supporting Your Retirement Planning
As retirement approaches, it’s crucial to ensure your superannuation is optimised to support your goals. Our advisers can assist with:
- Optimising Retirement Outcomes: By assessing your current superannuation balance, predicting future needs, and developing a tailored strategy, we can help you reach your retirement goals, considering factors like inflation and individual objectives.
- Investment Returns and Managing Risk: Superannuation investments are subject to market volatility, and managing this risk is critical. Our financial advisers can recommend diversified portfolios to help you navigate these uncertainties.
- Tax Efficiency: It is vital to manage taxes both during the accumulation phase and retirement phase. We offer strategies like transition-to-retirement income streams or concessional contributions to help reduce tax liabilities.
- High-Balance Accounts and Tax Implications: If you have a super balance exceeding $3 million, the proposed Division 296 taxes could impact you. Our advisers can assist in implementing tax planning strategies to mitigate the effects of these changes.
- Superannuation Gender Gap: Women often face unique challenges in building their super balances, such as time out of the workforce for caregiving. Our financial advisers can help women catch up by recommending strategies like salary sacrificing and leveraging government incentives.
Conclusion
In 2025, the superannuation landscape is set to evolve, with potential changes on the horizon. Whether you are preparing for retirement, managing your superannuation investments, or considering how to address new tax implications, it’s crucial to stay informed and seek professional advice to navigate these developments effectively.
———————————————————————————————————————-
BOOK YOUR FREE 15 MINUTE CONSULTATION
We offer a 15-minute no obligation consultation to existing property investors, first home buyers and small business owners who are looking at property investments, business and asset protection.
Please complete the form and a member of our team will be in touch shortly- CLICK HERE TO BOOK YOUR FREE CONSULTATION
How can we help?
If you have any questions or would like further information or you are seeking property tax advice, please feel free to contact our office via email –info@investplusaccounting.com.au or phone 02 9299 7000 to either speak with someone or arrange a time for a meeting so we can discuss your requirements in more detail.
We have offices in Bankstown, Cronulla, Sydney CBD, Bowral, Liverpool, Adelaide, New Zealand and Dubai. You can arrange a free 15 minute no obligation chat to discuss your options. Please arrange an appointment with our office by clicking here
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Investment Plus Accounting Group, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.