Australia’s superannuation system is undergoing significant reforms starting in July 2025, with updates that will impact workers, retirees, and employers alike.
These changes aim to bolster retirement savings, promote equity, and modernize contribution methods. Below is a detailed overview of these upcoming reforms, including what to expect and how to prepare.
Key Reforms in Superannuation from July 2025
| Policy Change | Details | Who is Affected |
|---|---|---|
| Superannuation Guarantee (SG) Rate | Increase from 11.5% to 12% | Employees & Employers |
| Super Contributions on Paid Parental Leave | Government to pay super on Paid Parental Leave | New Parents |
| Higher Tax on Large Balances | 30% tax on earnings above $3 million | High Net-Worth Individuals |
| Transfer Balance Cap (TBC) Increase | Cap raised from $1.9M to $2M | Retirees |
| Payday Superannuation (2026) | Super paid with each paycheck | Employees (Future Impact) |
Detailed Breakdown of the July 2025 Superannuation Changes
1. Increase in Superannuation Guarantee (SG) Rate
Starting July 1, 2025, the Superannuation Guarantee (SG) rate will rise from 11.5% to 12%. This means that employers will be required to contribute 12% of an employee’s ordinary time earnings to their nominated super fund.
- Impact: The increase will gradually enhance retirement savings over time.
- Note: Employees on total remuneration contracts may see adjustments to their base salary unless employers choose to absorb the extra cost.
2. Superannuation Contributions During Paid Parental Leave
For the first time, super contributions will be made on government-funded Paid Parental Leave (PPL) starting July 1, 2025.
- Benefit: This will help address the retirement savings gap, particularly benefiting women, who are often more affected by career interruptions for parenting.
- Impact: Parents on PPL will now see their superannuation continue to grow even while they’re away from work, promoting fairness in retirement income.
3. Higher Tax on Superannuation Balances Over $3 Million
Australians with super balances exceeding $3 million will face a 30% tax rate on earnings from the excess balance. Currently, earnings are taxed at 15%.
- New Rule: Earnings on the portion above $3 million will be taxed at 30%.
- Targeted Group: This change will affect only a small percentage of high-balance accounts, ensuring that the system remains fair for the majority of Australians.
4. Increase in Transfer Balance Cap (TBC)
The Transfer Balance Cap (TBC), which is the maximum amount that can be transferred into a tax-free retirement income stream, will rise from $1.9 million to $2 million.
- Impact: This change will allow more retirees to enjoy greater tax-free income during retirement.
- Beneficiaries: Primarily retirees or those nearing retirement who will benefit from higher tax-free retirement income.
5. Payday Superannuation (Effective July 2026)
The Payday Superannuation system, which will take effect in July 2026, means that employers will be required to pay superannuation on a pay-as-you-go basis, with contributions made alongside wages, instead of quarterly payments.
- Benefit: This will ensure employees receive their super entitlements more quickly and reduce instances of missed or delayed payments.
- Preparation: Employers should begin preparing now to comply with this future requirement.
The July 2025 superannuation reforms are among the most significant changes to Australia’s retirement system in recent years.
While most employees will benefit from the increase in the Superannuation Guarantee (SG) rate and the introduction of super contributions during Paid Parental Leave, those with balances over $3 million will need to prepare for the new tax rates.
Additionally, the move toward Payday Superannuation in 2026 promises to make retirement savings more efficient and timely.
Staying informed and planning ahead will help Australians maximize the benefits of these reforms, ensuring a more secure financial future.
FAQs
Will my take-home pay decrease when the SG rate increases?
If your salary package is “inclusive of superannuation”, the increase in the SG rate could slightly reduce your take-home pay unless your employer absorbs the additional cost.
How many people will be affected by the new 30% tax rate on super balances over $3 million?
Approximately 80,000 Australians with super balances exceeding $3 million will be impacted by the new higher tax rate on earnings.
Is the Payday Superannuation system starting immediately in 2025?
No, Payday Superannuation will be implemented starting July 2026. However, employers are encouraged to start preparations now to ensure compliance with the new system.