Super Guarantee Increase to 12%

The headline change from 1 July 2025 is the increase in the Superannuation Guarantee (SG) rate from 11.5% to 12% of your ordinary time earnings. This marks the completion of a gradual increase that began years ago, finally reaching the long-planned 12% target.

What This Means for Your Retirement

For an employee earning $80,000 annually, the SG increase means an extra $400 going into super each year. While this might seem modest, the power of compound interest makes it significant:

What to Watch: Salary Sacrifice Impact

If you have a salary sacrifice arrangement, review it after the SG increase. Your total concessional contributions (employer SG + salary sacrifice + personal deductible) are still capped at $30,000 per year. With higher SG, you may have less room for salary sacrifice.

For example, on a $100,000 salary:

• Employer SG at 12%: $12,000
• Remaining concessional cap: $30,000 - $12,000 = $18,000
• Previously (at 11.5%): $30,000 - $11,500 = $18,500 available

Transfer Balance Cap Increases to $2 Million

The Transfer Balance Cap (TBC) limits how much you can transfer into the tax-free pension phase of superannuation. From 1 July 2025, this cap increased from $1.9 million to $2 million.

Proportional Indexation Rules

If you've never started a pension, you have the full $2 million cap available. However, if you've previously used some of your cap, you receive proportional indexation:

Super on Paid Parental Leave

One of the most significant changes for new parents: from 1 July 2025, superannuation is now paid on government-funded Paid Parental Leave (PPL) payments. This is a landmark change that helps address the super gap, particularly for women.

How It Works

• Super is calculated at 12% of your PPL payment
• Contributions are paid as a lump sum after the financial year ends
• Interest is included from the time super was accrued
• Applies to babies born or adopted from 1 July 2025

Other Key Contribution Caps for 2025-26

Concessional Contributions Cap: $30,000

The concessional (before-tax) contributions cap remains at $30,000 per year. This includes:

• Employer Super Guarantee contributions
• Salary sacrifice contributions
• Personal tax-deductible contributions

Non-Concessional Contributions Cap: $120,000

The non-concessional (after-tax) contributions cap is $120,000 per year. You can also use the bring-forward rule to contribute up to $360,000 in a single year if you're under 75 and haven't used this provision in the past 2 years.

Downsizer Contributions

If you're 55 or older and sell your home, you can contribute up to $300,000 per person ($600,000 per couple) into superannuation. This is in addition to other contribution caps and doesn't count towards them.

Payday Super: Coming July 2026

While not effective until 1 July 2026, Payday Super is a significant upcoming change. Currently, employers must pay super quarterly. From July 2026, super must be paid within 7 business days of each payday.

Benefits of Payday Super

• Faster compound growth: Your super starts earning returns sooner
• Easier tracking: You can verify super payments with each pay
• Reduced unpaid super: Harder for employers to fall behind on payments

For the average 25-year-old worker, Payday Super is estimated to add an extra $6,000 to their retirement balance (in today's dollars).

Division 296 Tax: Balances Over $3 Million

From 1 July 2025, a new 15% tax applies to earnings on super balances exceeding $3 million. This brings the total tax on earnings above $3M to 30% (15% standard + 15% Division 296).

If you're approaching this threshold, consider strategies like:

• Withdrawing amounts over $3M to an investment bond or personal name
• Maximising pension phase benefits before reaching the cap
• Consulting a financial adviser for personalised strategies

Deeming Rate Freeze Extended

Good news for retirees receiving a part Age Pension: the deeming rate freeze at 2.25% has been extended. This means:

• Centrelink assumes your investments earn 2.25% (above the threshold)
• If you're actually earning more, you keep the difference without pension reduction
• Particularly beneficial as savings account rates are above 5%

Use our Age Pension Calculator to see how your super and other assets affect your pension entitlement.

2025-26 Super Caps Summary Table

Action Items: What You Should Do Now

Catch-Up Contributions Strategy

If you didn't fully use your concessional cap in previous years and your total super balance is under $500,000, you can carry forward unused cap amounts for up to 5 years.

For example, if you only contributed $15,000 in 2022-23 (cap was $27,500), you have $12,500 carry-forward available. Combined with your current year cap, you could contribute up to $42,500 in concessional contributions this year.

Use our Superannuation Calculator to project your retirement balance under different contribution scenarios.

Key Dates to Remember

Final Thoughts

The superannuation changes from July 2025 are largely positive for most Australians. The increase to 12% SG, super on paid parental leave, and higher transfer balance cap all help build more secure retirements.

However, the changes do require some attention—particularly if you salary sacrifice, have a high balance, or are approaching retirement. Take time to review your super strategy and ensure you're making the most of these new rules.

Use our suite of calculators to model different scenarios and see how these changes affect your specific situation.