Tomorrow is the start of the new financial year. As always, this brings with it changes to superannuation rates, caps and taxes. Here is a run-down on the four major changes.
- Superannuation guarantee levy increases to 12%
Originally introduced at a rate of 3% in 1992, the superannuation guarantee (SG) levy will finally reach its target rate of 12% in the 25/26 financial year. This is the rate employers are required to contribute to the super of their employees and is calculated as a percentage of the employee’s ordinary times earnings. If the employee’s quarterly salary (ordinary times earnings) exceeds $62,500 ($250,000 pa), the maximum required SG payment is $7,500 ($30,000 pa).
- Contribution caps unchanged, but threshold for non- concessional contributions increases
There are no changes to either the concessional contributions cap of $30,000, or the non-concessional contributions cap of $120,00. The former comprises the employer’s SG contribution of 12%, salary sacrifice amounts and amounts contributed where a tax deduction is claimed. Non-concessional contributions are person contributions from your own monies.
To be eligible to make a non-concessional contribution, you must be under 75 years of age and your total superannuation balance (at the end of the previous financial year, i.e. 30/6/25) must be under the transfer balance cap. The transfer balance cap is increasing from $1,900,000 to $2,000,000 in FY25/26 (see below). This means that some superannuants who weren’t eligible to make a non-concessional contribution in FY24/25 could be eligible in 25/26.
It also means that the thresholds to access the ‘bring-forward’ rule increase. The rule potentially allows “3 years’ worth” of non-concessional contributions in one hit, such that a person under the age of 75 could effectively get $360,000 into super in one go. A couple could get $720,000 into super.
To access the ‘bring forward rule’ in full, your total superannuation balance had to be under $1,760,000 on 30/6/25. If your total super balance was between $1.76m and $1.88m, the total amount you can contribute is capped at $240,000. If it was between $1.88m and $2.0m, the total amount you can contribute is capped at $120,000. If it was over $2.0m, you can’t make non-concessional contributions.
- Transfer balance cap increases to $2 million
The transfer balance cap increases from $1.9 million to $2 million. This cap governs the total amount of super monies that can be transferred into the retirement (or pension) phase of super. In this phase of super, the investment earnings are tax free.
The transfer balance cap is a lifetime limit, and once exhausted, can’t generally be re-accessed. Originally set at $1,600,000 in 2017, the increase to $2 million is a result of indexation. If you have partially accessed your transfer balance cap, your spare capacity will also have been indexed and from 1 July, you will have a higher limit. Check mygov to see your new capacity.
With the increase to the transfer balance cap, there are also increases in eligibility for non-concessional contributions (see above), co-contributions and the spouse tax offset.
There are no changes to the pension withdrawal factors: age-based factors which set minimum withdrawal requirements from account-based pensions.
- New super tax on balances over $3 million
Legislation for the new tax is expected to be re-introduced into the Parliament in late July. There are three important things to realize with this tax (as described in the draft legislation):
- It is based on member balances, not super fund balances. The threshold to pay is a total superannuation balance of $3,000,000 at the end of the financial year (i.e. 30/6/26). This means that a two-person fund (say) with a total balance of $5,000,000 split between the two members (balances each of $2,500,000) won’t be impacted.
- It will effectively only apply to the proportion of your super balance over $3 million.
- It is measured on the investment earnings corresponding to the balance over $3,000,000, realized and unrealized. It is a separate tax, which will be collected by the ATO following the issue of an assessment to the individual taxpayer.
Called Division 296 tax and applied at a rate of 15%, calculation is relatively straight forward.
Tax = 15% x Earnings x Proportion of earnings
where
Earnings = (Total Super Balance (TSB) at end of year less TSB at start of year) plus withdrawals less contributions
Proportion of Earnings above $3m = (TSB at end of year – $3,000,000) / (TSB at end of year)
Taking an example: Fred has a total superannuation balance of $4,000,000 at 30/6/26. At the start of the year (1/7/25), his total superannuation balance was $3,500,000. During the year, he contributed $100,000 as a non-concessional contribution.
Fred’s earnings are: ($4,000,000 – $3,500,000) – $100,000 = $400,000
Proportion of earnings above $3m = ($4,000,000 – $3,000,000)/ $4,000,000 = 25%
Tax = 15% x $400,000 x 25% = $15,000.
In the example above, Fred will pay an additional $15,000 in tax. This will be known as a Division 296 tax, with Fred given 84 days to pay following the issue of an assessment notice. He will be able to pay it personally (from his own monies) or direct his super fund(s) to pay it.
For more information about Division 296 tax, and strategies to minimise its impact, see https://switzerreport.com.au/5-tips-to-minimise-the-impact-of-the-new-3m-super-tax/ [1]