Disclaimer: This article is for informational purposes only and should not be taken as financial advice. Readers should conduct their research and consult with a qualified financial professional before making any financial decisions or taking action based on the content of this article.
If you’ve been tuning in to the news, chatting with friends, or scrolling through social media lately, then you’ve probably heard a lot of noise about superannuation changes coming into effect on 1 July.
Some of it’s true, some of it’s wildly exaggerated, and some is just plain fiction. So, what’s happening with your super, and what’s just a storm in a teacup? Let’s break it down.
First, let’s get the facts straight. A few genuine changes to superannuation will kick in on 1 July, and most of them are designed to keep the system running smoothly.
1. Super guarantee rate rises to 12 per cent
The most significant change for Australians is the increase in the Superannuation Guarantee rate. This is the percentage of your employer’s salary contribution to your super fund.
From 1 July, it’s going up from 11.5 per cent to 12 per cent. This is the final step in a series of gradual increases that began in 2021, and it means a little more money going into your nest egg each pay cycle.
This is good news for those still working. Even a slight contribution increase can significantly improve a retirement balance thanks to compound interest.
2. Indexation of transfer balance and defined benefit caps
A couple of technical changes are also happening. The general transfer balance cap (the maximum you can transfer into a tax-free retirement account) and the defined benefit income cap are increasing due to indexation.
This is a routine adjustment to keep up with inflation and rising living costs.
3. Super on paid parental leave
Another positive change: from 1 July, people receiving government-paid parental leave will start earning superannuation entitlements on those payments.
This is a long-awaited move to help close the retirement savings gap, especially for women who take time out of the workforce to raise children.
The $3 million super rule: Who does it affect?
Let’s talk about the change that’s been making headlines—the new tax on super balances over $3 million.
From 1 July, if you have more than $3 million in your super account, the earnings on the portion above that threshold will be taxed at an extra 15 per cent.
That’s on top of the existing 15 per cent tax on super earnings, bringing the total to 30 per cent for those high balances.
But before you panic, let’s put this in perspective: the government estimates this will only affect about 80,000 Australians—just 0.5 per cent of all super account holders. For the vast majority of us, this change is a non-event.
Here’s a simple example: If you have $4 million in super and it grows to $4.5 million over the year, only the earnings on the $1.5 million above the $3 million threshold will be hit with the extra tax.
In this case, one-third of your earnings would be taxed more. If your super balance is under $3 million, you won’t notice any difference at tax time, no matter how well your investments perform.
Is the law locked in?
Interestingly, while the government has announced this change and intends to start on 1 July, the legislation hasn’t passed yet.
Parliament won’t sit again until after 1 July, but with Labor’s majority and the Greens’ support (possibly with some tweaks), it’s expected to become law soon.
The Treasurer has said it’s not unusual for tax changes to be legislated after their start date, so don’t be surprised if there’s a bit of a lag.
What’s NOT changing: Debunking the myths
With all the chatter, some wild rumours have been doing the rounds. Let’s set the record straight:
- No, the preservation age is NOT rising to 70. The preservation age (the age you can access your super) remains unchanged. There are no plans to increase it to 70.
- No, there are no new withdrawal limits. You can still access your super under the same rules as before.
- No, your super isn’t being raided or frozen. These are classic scare tactics and misinformation.
The Australian Taxation Office has even warned about these fake news stories, so if you hear them, take them with a grain of salt.
Have you heard any wild superannuation rumours lately? Are you affected by the new $3 million rule, or are you happy to see your super contributions increase? Share your thoughts, questions, or concerns in the comments below.
The most important item YLC has left out: the Labor government has proposed a 30% tax on unrealised capital gains for superannuation balances exceeding $3 million. If implemented, this change would fundamentally alter the way Australians are taxed on retirement savings — and could set a dangerous precedent that extends beyond self-managed super funds (SMSFs) into personal wealth.
Many superannuation funds have their business factory and farm owned by their super fund. If the value of these assets rise in a year, then the tax must be paid, but the asset is illiquid. In a year when the value of the asset drops there is no compensation for any tax paid the previous year and, as proposed, the drop in value cannot be carried forward.
Further when the asset is finally sold the normal capital gains – selling price vs purchase price – will be taxed – again. Highway robbery!
Why has nobody mentioned the ACCC about to fine Australian Super for payouts during Covid. Who will have to lose part of their super to pay the fine; you guessed, people like me who has their meagre life savings in superannuation.