Superannuation Changes Coming into Effect on 1 July 2025
As part of ongoing reforms to strengthen Australia’s retirement system, several key superannuation changes will come into effect on 1 July 2025. Announced by the Australian Government and administered through the Australian Taxation Office (ATO) and the Australian Prudential Regulation Authority (APRA), these updates will impact employers, employees, and high-balance super fund members alike. Understanding these changes will help your business stay compliant and support your workforce through a smooth transition.
What’s Changing on 1 July 2025?
Increase to the Superannuation Guarantee Rate
The Superannuation Guarantee (SG) rate will rise from 11.5% to 12%. This rate must apply to all ordinary time earnings paid on or after 1 July 2025, regardless of when the work was performed. This marks the final legislated step in the government’s plan to gradually raise the SG rate to help Australians grow their retirement savings.
Increase to the General Transfer Balance Cap
The general transfer balance cap will increase from $1.9 million to $2 million. This cap limits the total amount of superannuation that can be transferred into the retirement phase.
Proposed Tax on Super Balances Over $3 Million
The government is considering a new tax that would affect people with total superannuation savings over $3 million. Currently, earnings in super funds are taxed at 15%, and earnings in super pensions are not taxed at all. Under the proposal, an additional 15% tax would apply to earnings on the portion of super balances exceeding $3 million.
This change would only impact individuals with total super savings above $3 million. If your super balance is below this threshold, the proposed tax would not apply to you.
Status of the Proposed Legislation
The government has previously attempted to pass this legislation but was unsuccessful. For the proposal to become law, it must pass through Parliament, which will not sit again until 22 July. As a result, the final details of this proposal remain uncertain.
There is also the possibility that the government could backdate the start of this new tax to 1 July 2025, creating uncertainty for planning purposes. Individuals with super balances above $3 million may need to wait for further clarification, and advisers can assist in monitoring developments as they unfold.
How Businesses Can Prepare
With July approaching, businesses can take several practical steps to prepare for these changes.
Update Payroll Systems
Ensure payroll systems are ready to calculate and process superannuation contributions at the new 12% SG rate to remain compliant from 1 July 2025.
Prepare Internal Teams
Bring internal teams up to speed on the changes. This can help reduce errors and ensure confident communication with employees. A short internal memo or training session can make a meaningful difference.
Communicate With Employees
Keep employees informed about what the SG increase means for them. For high-income earners who may be affected by the proposed tax on balances over $3 million, encourage them to seek financial advice. This can also be an opportunity to discuss superannuation more broadly and support long-term financial wellbeing.
Plan for Increased Costs
The SG increase will result in a modest rise in payroll expenses. Reviewing budgets and forecasts now can help businesses absorb the change smoothly. For some organisations, this may also be an appropriate time to review overall remuneration strategies.
