The 2025 super changes you need to know

Another year, another raft of changes affecting retirement savings.

That said, 2025 is an election year and not every proposed change is set in cement.

With this in mind, here's what's in store:

1. Employer super contributions to increase to 12%

It's amazing to think that compulsory employer-paid super has been with us for 33 years.

When the super guarantee (SG) was first rolled out in 1992, employer contributions were set at just 3% of ordinary time earnings (or 4% for employers with an annual payroll above $1 million).

It's a low figure by today's standards, which call for employer contributions equal to 11.5% of ordinary time earnings - a rate that will jump to 12% from July 1. This will be the legislated peak SG rate.

While an increase of 0.5% may not sound like much, it's likely to have a significant impact on many people's retirement savings.

The super industry body ASFA says that by 2050, 20% fewer Australians will need to rely on the age pension and our national retirement system will remain affordable despite 
an ageing population.

2. Contributions limits to rise 

For the 2024-25 financial year, workers can claim before-tax (concessional) super contributions of up to $30,000, an increase on the $27,500 limit for 2023-24.

The $30,000 benchmark includes employer-paid contributions. So be sure you don't exceed the total limit if you add to super from your own pocket. You could end up paying extra tax.

If you have the cash available, you may be able to claim unused concessional contributions extending back five years. In 2024-25, for instance, it's possible to claim unused pre-tax super limits from 2019-20.

The current financial year also sees a rise in the annual limit for non-concessional (non-deductible) contributions. These are capped at $120,000 for 2024-25, up from $110,000 previously.

3. Super to be paid on parental leave

Women often make financial sacrifices by taking time out of the workforce to raise children. This is set to change, as far as super is concerned, from July 1.

From mid-year, new parents can expect to receive super contributions based on 12% of their paid parent leave payment when they take time off to care for a new baby.

This is a ground-breaking change for women, who typically enter retirement with 25% less in super than men. The Federal Minister for Social Services, Amanda Rishworth, says paying super 
on paid parental leave will boost the retirement savings of around 180,000 families each year.

It won't put extra cash in the hip pockets of families today, but it will go a long way to improving the financial wellbeing of parents in the future.

4. 30% tax on returns for balances of more than $3 million

Here's one change shrouded in uncertainty. The Albanese government is proposing that from July 1 there will be a 30% tax on super earnings above $3 million, up from 15% at present.

As it stands, only 80,000 people are expected to be impacted by this so-called Division 296 tax. Over time, however, a growing number of people are likely to accumulate super in excess of $3 million, as this amount will not be indexed.

The proposal is far from a done deal, and the Coalition has vowed to scupper any plans to increase tax on fund earnings if it wins this year's Federal election.

5. Looking ahead

Taking a longer term view, more changes are afoot.

The Federal government's Quality of Advice Review has pushed for super funds to step up as a key source of low-cost financial advice for fund members.

We have already seen this starting to take effect, with Colonial First State offering digital advice to members for an annual fee of $88. And Hostplus has introduced SuperSmart, an education-led digital tool aimed at helping members prepare for retirement.

Chances are we'll see more funds make similar options available to members in 2025 and beyond.

From July 1, 2026, employers will be required to pay employees' super contributions at the same time as salary and wages. Although this measure is not yet law, it's a positive step forward from the current norm of employers paying contributions quarterly.

While most employers do the right thing, the Australian Taxation Office estimates $3.6 billion worth of super went unpaid in 2020-21 as a result of the timing gap between paying wages and paying employee super contributions.

By switching to the new system of payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around 1.5%, or $6000, better 
off in retirement, according to ASFA.

All this goes to show that while regular changes may be a feature of our super system, the finetuning generally works in our favour, helping Australians grow funds for a comfortable retirement.

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