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Superannuation

Superannuation changes remain in limbo as Federal Budget approaches

Published on: 19 Mar 2025

SYDNEY, 19 March 2025: High cost of living may have Australians concerned about their retirement savings, and lagging superannuation legislation is no help. The fiscal settings look to remain uncertain leading up to the May Federal election yet are crucial to ensuring Australia can secure their retirement lifestyle.

Robyn Jacobson, Senior Advocate at The Tax Institute, said ‘The superannuation system in Australia must continue to reflect the developing circumstances of Australians and change to accommodate those needs.’

Clarity is needed on a range of superannuation measures, including:

Division 296 — $3m superannuation balance tax

The proposed new tax on the proportionate earnings on superannuation balances exceeding $3 million is poorly designed and sets a dangerous precedent by including taxing unrealised gains. 

Jacobson explained that ‘The Tax Institute has made multiple submissions to the Government with other preferable alternatives to the proposed approach, including to index the threshold. This proposed measure in its original form continues to hang over the heads of Australian taxpayers, without certainty of how it will affect them and their retirement. Fundamental changes are needed to better ensure equitable outcomes before further progress can be made.’

Residency requirements for self-managed superannuation funds (SMSFs)

As part of the Federal Budget 2021–22, the Government proposed to relax residency requirements for SMSFs by extending the central management and control test safe harbour from two to five years and removing the active member test for both SMSFs and APRA-regulated funds.

These plans were deferred as part of the October Federal Budget 2022–23 and no progress has been made since then.

Jacobson said, ‘Extending the central management and control test safe harbour to five years would allow SMSF members to continue contributing to their own funds even when overseas. Abolishing the active member test would also level the playing field to align the treatment of SMSFs with APRA-regulated funds.’

‘The Government should prioritise these straightforward measures for SMSFs as part of next week’s Federal Budget 2025–26 to achieve more flexible and fairer superannuation contribution rules.’

Payday Super

A new regime requiring employers to pay their employees’ superannuation at the same as salaries and wages was slated to begin as of 1 July 2026, however, exposure drafts of the enabling legislation were released just last Friday (14 March 2025).

Jacobson said, ‘We support the policy underpinning the measure and coinciding overdue reforms to the penalty provisions. We encourage continuing consultation by government, but time has run out for digital service providers to design software with the certainty of a legislated framework before the May election. The proposed start date of 1 July 2026 will likely need to be deferred so that employers have time to meet their proposed new obligations.’

‘Employers and their tax agents, as well as superannuation funds and other intermediaries essential to the payroll cycle, require certainty to prepare for and implement the significant changes associated with Payday Super.’

ENDS

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