Strategies for the new financial year

As we commence a new financial year it is important to revisit your finances, particularly in light of recent changes to the superannuation system. Central to these changes is the 0.5% increase in the Superannuation Guarantee (SG), bringing it to 12%. Understanding the potential long-term impact of this adjustment may also provide an incentive to implement a broader range of contribution strategies. The Government has also increased the amount able to be held in the retirement phase of super and has drafted legislation for the proposed Division 296 tax.

Understanding the Superannuation Guarantee  

The Superannuation Guarantee (SG) is the minimum contribution made to an employee’s superannuation account. From 1 July 2025, the SG has increased to 12%, marking the final step in a gradual rise from 9.5% in 2020. Although the most recent increase is only 0.5%, the cumulative effect is likely to significantly influence the retirement outcomes of many Australians. For example, an individual earning $150,000 per year (inclusive of superannuation) throughout their career may benefit from an additional ~$742,000 in retirement savings, despite only contributing around $137,000 more through the higher SG rate (12% compared to 9.5%).

Consideration: Account for an increased SG payment as a proportion of your concessional contributions this financial year. Individuals contributing up to the $30,000 concessional limit may need to adjust their contribution strategies.

Source: E&P

Please note, the above graph is for illustrative purposes only and does not constitute advice. The actual outcome will vary based on market movements, fees, insurance premiums, tax paid, and your relevant personal circumstances. The starting balance is $5,000 at age 20. The portfolio growth rate of 7% is based on the average 10-year return of a typical balanced portfolio as per Superratings. Individual performance may also differ due to timing of transactions or investment size of holdings. 

Maximise your super contributions

Employer contributions are not the only means of building your superannuation balance. Concessional contributions such as salary sacrifice arrangements or personal bank transfers into superannuation (where a tax deduction is claimed) can also help grow your retirement savings. These contributions also reduce your taxable income, providing additional tax benefits.

Consider the example of Elijah, who is 35 years old, has $250,000 saved in superannuation, and earns $150,000 per year (plus superannuation). Elijah is considering making additional contributions and wants to assess his options. If he continues on his current trajectory, his superannuation is projected to grow to over $2 million by retirement at age 65. By contributing an additional $250 per month, his balance is expected to nearly double to $3.89 million, while also generating net tax savings of $21,600 over the period.

If Elijah adopts a more aggressive strategy and contributes $1,000 monthly, he could save over $80,000 in tax and retire with an additional $2.7 million in superannuation.

Consideration: There are short-term (tax savings) and long-term (additional superannuation) benefits from making additional contributions to super. Small, regular deposits can compound meaningfully over time.

Source: E&P

Please note, the above table is for illustrative purposes only and does not constitute advice. The actual outcome will vary based on market movements, fees, insurance premiums, tax paid, and your relevant personal circumstances. The portfolio growth rate of 7% is based on the average 10-year return of a typical balanced portfolio as per Superratings. Individual performance may also differ due to timing of transactions or investment size of holdings. 

Preparing for Division 296 changes: The growing importance of spouse splitting

Spouse contribution splitting is a strategy in which one spouse (the contributing spouse) transfers up to 85% of their superannuation contributions made in the previous financial year to their partner (the receiving spouse). You can now split contributions made in the financial year ending 30 June 2025. Traditionally, this strategy has been favoured by couples aiming to build the superannuation balance of one spouse to optimise tax outcomes (e.g. contributing more to the higher-earning spouse’s account) or to access funds earlier (e.g. contributing more to the older spouse’s account).

There is now additional merit in pursuing a spouse splitting strategy to equalise superannuation balances, particularly as the Government continues to advance the proposed Division 296 tax on super balances exceeding $3 million. While the Government estimates that 80,000 Australians will be impacted initially, this number is expected to grow, as the $3 million threshold is currently not proposed to be indexed. As illustrated in Elijah’s example above, many younger Australians may be affected by this tax in the future. Thus, early planning can help manage this risk over time. Please see here for our overview on the proposed Division 296 tax and here for further detail on spouse splitting.

Consideration: Assess your finances collectively as a couple. Where there are differences in super balance, age, or incomes, a spouse splitting strategy may be applicable.

Overview

The new financial year is an important time to form an updated financial strategy. While the Government’s increase in the Superannuation Guarantee will help Australians save more for retirement automatically, even small increases to this minimum contribution can make a significant difference to your retirement outcomes. Managing superannuation as a couple is now increasingly important due to the potential long-term implications associated with Division 296 tax. The tax savings available in the retirement phase of superannuation are also now more accessible due to the increased Transfer Balance Cap. An Evans and Partners financial adviser can provide personalised guidance on managing your superannuation and building wealth in a tax-effective manner.