The end of each financial year highlights an opportunity to review your financial position and make the most of available tax opportunities before 30 June. Navigating the rules and limits around superannuation can be complex, so staying informed and proactive is essential.
Maximise deductible contributions
For many Australians, one of the largest tax deductions available are concessional super contributions. Money invested into superannuation in this manner is taxed at 15% going into the fund, but you, the member, will receive an equivalent tax deduction at your marginal tax rate. So, if you’re in the 47% tax bracket for example, this represents a 32% tax saving. The limit on concessional contributions is $30,000 for the 2024/25 financial year and includes:
- Contributions made by your employer like compulsory super guarantee (SG), salary sacrificed amounts & other before-tax amounts such as insurance premiums.
- Personal super contributions that you make and then claim as a personal tax deduction.
- Notional taxed contributions if you are a member of a defined benefit fund.
In order to claim the associated tax deduction for personal super contributions, you must submit a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form and receive an acknowledgement from the fund. This must be done before you lodge your 2025 tax return or before 30 June 2026 if you haven’t yet lodged.
Consider carried-forward concessional contributions
For Australians with a super balance under $500,000, the ability to carry forward unused concessional contribution cap amounts from prior years may be a way to contribute and claim a deduction in excess of the $30,000 annual limit. Unused cap amounts are available for 5 years before they expire. So, any remaining concessional cap from the 2019-2020 financial year will expire if not used by 30 June 2025.
Again, some tax planning is required here as you want to ensure your taxable income is high enough to warrant the deduction. This may be beneficial for those who have sold investment properties or assets during the year and have incurred large capital gains.
Maximise non-concessional contributions
Investing after-tax money into superannuation can be a great way to invest spare cash and build your super balance in the lead-up to retirement. Although tax deductions aren’t attached to non-concessional contributions, investing money in the low tax superannuation environment at 0%-15% is still very attractive compared to marginal tax rates. The limit on non-concessional contributions is $120,000 for the 2024/25 financial year.
Provision to bring forward non-concessional contributions
There is also a provision to bring forward 3-years’ worth of non-concessional contribution cap amounts, effectively allowing members to contribute up to $360,000 in the 2024/25 financial year. This can be beneficial for those who have a large amount of cash to invest, perhaps from an inheritance or business sale, or those who are approaching retirement age and are looking to build up their superannuation balances from existing wealth in other structures.
Under existing legislation, contribution caps will not be indexed from 1 July 2025. However, the Total Superannuation Balance threshold will be indexed from $1.9m to $2m. This provides an opportunity for superannuation fund members to increase their balances via non-concessional contributions, as outlined below:
*There may be tax implications of exceeding contribution caps and other impacts (such as work test requirements, accessibility, or increased Division 293 tax for high income earners), so it’s best to speak to your financial adviser or accountant prior to making any contributions.
Delay starting a pension until 1 July 2025
It has also been legislated that the general transfer balance cap will be indexed from $1.9m to $2m effective 1 July 2025. This means people looking to start a superannuation pension would be wise to wait until 1 July to make use of the increased threshold.
Once a superannuation pension is commenced, your personal pension threshold is the legislated cap at the time, regardless of the amount you start with. So, commencing a pension from 1 July when the cap is higher allows members to invest more in the tax-free pension environment over their lifetime.
Ensure your minimum pension has been paid
For those already in pension mode, it is essential your minimum pension requirements have been met before 30 June 2025. The minimum amount that must be withdrawn is a percentage of your pension balance on 1 July 2024, based on your age at 1 July 2024:
Failure to withdraw your minimum pension may result in your account reverting back to ‘superannuation mode’ for the 2025 financial year, incurring 15% tax on investment earnings.
Update on $3m super tax
The bill to impose an additional 15% tax on super balances over $3m, known as Division 296 tax, continues to face steep resistance. It was passed by the House of Representatives but has since lapsed in the Senate, with the focus now very much on the upcoming federal election. The proposed 30% tax on earnings would only apply to balances above $3m, but the real issue is the government’s proposal to tax unrealised gains at 30% as well. If passed, this would be the only structure in Australia that taxes unrealised gains.
A ‘wait & see’ approach should be taken here and investors should not pre-emptively withdraw money from superannuation at this stage.
Speak to us
To ensure you maximise your position in the lead up to 30 June 2025, consider the items above and speak to your financial adviser or tax accountant.
Emma Hicks is a financial adviser of HLB Mann Judd Wealth Management (NSW) Pty Ltd (AFSL 526052) ABN 65 106 772 696. This article contains general advice which does not consider your particular circumstances. You should seek advice from HLB Mann Judd Wealth Management (NSW) who can consider if the strategies and products are right for you.