Author: Michael Davison is senior manager, advocacy and retirement policy, and Richard Webb is senior manager, financial planning and superannuation policy, at CPA Australia.
There wasn’t a pot of buried gold in the federal budget’s superannuation policies. But we did uncover the good, the bad and the ugly for superannuants and their tax advisers.
The good: Payday super
Superannuation will be paid to employees on pay day from July 2026. At the moment this is paid quarterly.
We expect the Superannuation Guarantee Charge methodology will be changed to accommodate this. The package is designed to benefit those in lower-paid, casual and insecure work who are more likely to miss out when super is paid less frequently.
Aligning superannuation contributions with payroll cycles is a good idea and meets with community expectations. We support this sensible move. Employees will have greater visibility of their entitlements, and the ATO will be better able to recover unpaid superannuation.
Some employers may face cashflow issues when paying superannuation at the same time as payroll. However, they’ve been given a three-year runway to adjust their cashflow practices and make arrangements.
The bad: Proposed changes to non-arm’s length income
The budget lifted the lid on the government’s plans for changes to the treatment of superannuation fund expenses in the non-arm's length income (NALI) provisions.
The proposed amendments limit the income of self-managed super funds and small APRA-regulated funds taxable as NALI to twice the level of the general expense. The government also proposes to exclude contributions from fund income taxable as NALI. Large APRA-regulated funds will be exempt from the provisions for general and specific expenses.
These proposed changes bring much needed certainty to trustees. However, there is still considerable uncertainty regarding specific expenses. Moreover, there is the potential for severe and costly outcomes. This could include income from specific assets unnecessarily being made NALI for all future years, as well as any capital gains from asset disposal.
We’re especially concerned that treating large APRA-regulated funds differently to SMSFs undermines the neutrality of the system.
The ugly: $3 million tax rate hike
The “Better Targeted Superannuation Concessions” measure was confirmed in the budget. From 1 July 2025, individuals with a total superannuation balance over $3 million will see their tax concessions reduced.
The notional tax rate for earnings above the $3 million threshold will increase to 30 per cent. This is up from (and including) the ordinary fund earnings tax rate of 15 per cent. Individuals with a total superannuation balance below $3 million will not be affected.
The current contributions rules will remain unchanged. We are still waiting for details about how interests in defined benefit schemes will be valued.
The government estimates this measure will impact 0.5 per cent of people with a superannuation account, or about 80,000 individuals. However, the budget papers are unfortunately silent on whether the $3 million threshold will be indexed. This is important and is what makes this measure ugly. Many more people will be impacted over time as superannuation balances increase.
The government has said that this measure will not place a limit on how much an individual may hold in superannuation. But it’s another layer of complexity in the superannuation system.
Making superannuation fairer is important. Unfortunately, this measure is a piecemeal change and somewhat premature.
Our superannuation system is plagued by a plethora of caps, thresholds and limits affecting contributions and retirement income balances. This complexity is overwhelming and in urgent need of reform.
The government is yet to define the objective of superannuation. An objective would set the guardrails for meaningful change and broader reform.
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