Superannuation Changes in Australia: What You Need to Know
The past two years have seen some of the most significant changes made to our superannuation system since it was overhauled in 2017. Some changes affect almost every working Australian. Others affect only people with high balances or specific circumstances. This article discusses some of the material changes, when they apply and who they affect. Given superannuation laws are complex and actions taken within this highly regulated framework can have far reaching consequences you should obtain personalised advice before taking any specific action in response.
The Super Guarantee Rate Is Now 12%
From 1 July 2025, the Super Guarantee (“SG”) rate increased from 11.5% to 12%. This is the final scheduled increase under the current legislative timetable. Employers are now required to contribute 12% of eligible earnings to employees' super funds.
For most Australian employees, this happened automatically. Your employer adjusted payroll and the contributions started flowing at the higher rate. You did not need to do anything.
What this means for your balance: A 12% SG rate on a $120,000 salary means $14,400 in employer contributions per year, compared to $13,800 at 11.5%. This difference compounds over a career. For someone with 15 years to retirement, the additional $600 per year (growing with salary) adds a meaningful amount to the final balance, but it is not transformational on its own. The SG is a floor, not a strategy.
What you should do: Check your payslips and confirm the employer contributions match 12% of your ordinary time earnings. If they do not, follow up with your payroll department or the ATO.
The Transfer Balance Cap Increased
The transfer balance cap, which limits the total amount you can transfer into a tax-free pension account, increased in 2025-26 (to $2 million) and again in 2026-27 (to $2.1 million) due to indexation.
The general transfer balance cap directly affects the non-concessional contributions cap for people with high balances. If your Total Superannuation Balance (TSB) on 30 June of the previous financial year equals or exceeds the general transfer balance cap, your non-concessional contributions cap is nil. As the cap increases with indexation, some people who were previously locked out of making non-concessional contributions may become eligible again in 2026-27.
What you should do: You can check your your TSB, your non-concessional cap space and contribution history using the ATO online service. Consider whether you should make additional non-concessional contributions in the 2026-27 financial year. Given the complexity and the potential adverse tax consequences if the non-concessional cap is exceeded, it is best to consult a financial advisor who can help you make the right decision.
Contribution Caps Increased for 2026-27
For the 2026-27 financial year, the concessional contributions cap increased from $30,000 to $32,500. The concessional contributions cap covers all before-tax contributions: employer super guarantee payments, salary sacrifice and personal deductible contributions combined. The increase reflects indexation to average weekly ordinary time earnings.
The non-concessional contributions cap also increased in line with the transfer balance cap indexation. The applicable non-concessional contributions cap is published on the ATO website and it is $130,000 for the 2026-27 financial year.
Who benefits: Anyone who was hitting the previous $30,000 cap now has additional room to make concessional contributions. Self-employed professionals who rely on personal deductible contributions, employees with headroom for additional salary sacrifice and anyone making voluntary contributions now have $2,500 more concessional space before excess contributions tax applies.
What you should consider: If you salary sacrifice to the cap and have standing instructions set at $30,000, you can consider updating the arrangement with your employer to reflect the higher 2026-27 limit. If you make personal deductible contributions, you now have $32,500 minus your employer's SG contribution and any salary sacrifice as headroom for your personal deductible contributions. It would be wise to get advice from a financial adviser to understand what is suitable for you prior to making any changes to your existing arrangement.
Division 296 Tax: The large Super Balance Threshold
From 1 July 2026, additional tax is payable on super earnings if your total super balance exceeds certain threshold amounts. In general terms, an additional 15% tax is payable on taxable super earnings attributable to the portion of super balance exceeding the Large Super Balance Threshold (“LSBT”) which is $3 million for the 2026-27 financial year, and a further 10% additional tax will apply to taxable super earnings attributable to the portion of super balance exceeding the Very Large Super Balance Threshold (“VLSBT”) which is $10 million for the 2026-27 financial year. This is called Division 296 tax and it applies on top of the existing 15% tax on earnings in accumulation phase and the 0% tax on earnings in pension phase.
The measure targets what the government describes as overly generous tax concessions for very large super balances. It is now law.
How it works: For the 2026-27 financial year, Division 296 tax is not applicable if your total super balance is less than $3 million. Furthermore, it is calculated on taxable super earnings (which does not include unrealised capital gains). To determine your Division 296 tax liability you must first calculate the portion of your super balance that is in excess of the LSBT and the VLSBT (if applicable). For example, if your total super balance is $4 million, the excess over $3 million is $1 million, which is 25% of your total super balance. Assuming you are not in pension phase, this means 25% of your taxable super earnings will be subject to Division 296 tax, resulting in an additional 15% tax on this amount (i.e. total headline tax rate of 30%), whilst 75% of your taxable super earnings will be subject to the existing 15% tax rate on super earnings.
Who is affected: A small proportion of Australians. The $3 million and $10 million thresholds are subject to indexation in line with the consumer price index. In general, your total super balance is calculated across all your Australian super interests, including for example, any defined benefit interest and reversionary income streams.
Things to consider if your total super balance is approaching $3 million: When and how much to draw down on your super balance? Should you reduce your super contributions? Should more assets be held inside or outside of your super fund? These decisions are highly specific to individual circumstances and will interact with the management of your broader investment portfolio and tax position. Get advice before the balance crosses the threshold, not after.
Payday Super Started on 1 July 2026
From 1 July 2026, employers must pay super at the same time as wages rather than quarterly. Contributions must reach the employee's super fund within 7 business days of each payday.
This change addresses a long-standing problem with unpaid super: under the quarterly system, employers could withhold contributions for up to three months before any non-compliance was visible. That window allowed billions of dollars in unpaid super to accumulate undetected.
Who is most affected: Generally employees in hospitality, construction, retail and other industries with historically high super non-compliance rates. Casual workers with multiple employers. Anyone who was not monitoring their super fund regularly.
For high-income professionals: The direct cash benefit of more frequent contributions is smaller because the compounding boost of monthly versus quarterly contributions over a working career, while real, is not the primary value of this change. The primary value is visibility. Super appearing at every pay cycle is harder to miss, which means underpayment is more quickly identifiable and addressable.
What you should do: Log into your super fund's member portal and verify that contributions are arriving at each pay cycle. If your fund shows a gap in contributions for any period after 1 July 2026, contact your employer directly. If the issue is not resolved, you can report it to the ATO.
What Has NOT Changed
Preservation age: Still 60 for anyone born after 30 June 1964. You still need to meet a condition of release to access your super, with permanent retirement from the workforce being the most common.
Additional tax on concessional contributions: Division 293 is still in effect, meaning an additional 15% tax may apply to all or part of your concessional contributions if the sum of your taxable income plus concessional contributions and other adjustments exceed $250,000.
Tax on non-concessional contributions: Still nil, meaning after-tax contributions into super are not taxed again in the fund, provided they are within the applicable cap.
SMSF rules: The core compliance framework has not changed. SMSFs must still have an investment strategy, meet the sole purpose test, and comply with the related parties rules. Trustees remain personally responsible for fund compliance.
The work test: Still applies to deduction claims for personal voluntary contributions (i.e. not including employer SG) made after age 67 and before age 75.
What These Changes Mean by Life Stage
For professionals aged 45 to 55: The contribution cap increase and payday super changes are the most directly relevant. If you are not yet maximising concessional contributions, the higher 2026-27 cap gives more room. If you have accumulated unused concessional cap from previous years and your total super balance is below $500,000 as at 30 June of the previous financial year, the carry-forward rule is worth reviewing. Payday super creates the opportunity to monitor contributions more closely.
For professionals aged 55 to 65: Division 296 is worth monitoring if your balance is in the range where it could exceed $3 million. The general transfer balance cap indexation may affect non-concessional contribution eligibility. Begin reviewing transition to retirement strategies as you approach 60.
For business owners and the self-employed: Payday super does not directly change your obligations as a sole trader making your own super contributions, but it changes your obligations if you employ staff. Ensure payroll systems are updated. The contribution cap increase and personal deductible contribution rules are the more relevant changes for your own retirement savings.
For anyone with a super balance approaching $3 million: Division 296 is the most urgent change to understand to determine potential additional tax liability and consider whether to pay the tax from personal funds or from the super fund. Seek advice before the balance crosses the threshold.
Common Questions About Superannuation Changes in Australia
Is the Super Guarantee going to increase again after 12%?
No further increases have been legislated. The 12% rate that took effect on 1 July 2025 is the final scheduled increase under the current framework.
Do carry-forward concessional contributions still apply?
Yes. If your total super balance on 30 June of the previous financial year was below $500,000, you can carry forward unused concessional contributions cap amounts from the previous five financial years. This rule has not changed.
What is the best way to keep up with future super changes?
The ATO website and ASIC's Moneysmart website are the most reliable sources. The ATO publishes confirmed changes with effective dates, and Moneysmart provides consumer-friendly summaries. Contribution caps and thresholds are indexed periodically and change without major legislative announcements, so checking them at the start of each financial year is worthwhile.
Should I speak to a financial adviser about these changes?
If any of the changes above affect a decision you are currently facing or considering, yes. Division 296 and increases to concessional contribution cap and transfer balance cap can impact your tax position, investment strategy, cashflow management and estate planning. Integrated advice rather than a siloed view of superannuation alone would be beneficial.
Stay On Top of Your Super
Superannuation rules change every year. Some changes require action. Most require awareness. If any of the changes covered in this article affect a decision you are currently considering, Japhia Wealth Advisory can assess the specific implications for your financial position.
GENERAL ADVICE WARNING: This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Madison Financial Group Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances.