What’s changing from July 2025… and what’s not
With the closing of another financial year, we turn our attention to the 2026 financial year. This article covers some of the important changes impacting retirees from July 2025, as well as some of the proposed Government changes that are still in the works. We will also take a brief look at what superannuation strategies to consider from July 2025.
Changes from July 2025
- Employer contribution raised to 12% – Firstly, if you’re an employee you can expect your employer superannuation contributions to be raised from 11.5% of your base earnings to 12%. While only a small relative increase over one year, it has gradually raised from 9.5% back in 2021.
So, what should you do? Well, the start of the year is a good time to review your superannuation to factor in this additional contribution, as well as any salary sacrifice contributions or pay increase. The aim is to measure how you’re placed against the total concessional contribution of $30,000 for the year ahead.
- Pension income adjustments – For those who hold their superannuation in an account based pension or retirement income stream, the minimum pension income that you must pay yourself resets as at the 1 July account balance. The minimum amount that you must draw is determined by your age at the start of the financial year, and shown in this table.
For example, someone aged 75 will now have to draw 6% of their pension account balance throughout the year. You can of course draw more than the minimum, and it’s a good idea to plan for any changes to your pension cash flow.
For those who hold transition to retirement pension accounts, the minimum and maximum limits remain at 4% and 10%, and the amounts will be determined based on the 1 July balance.
- Transfer Balance Cap Increase: From 1 July 2025, the general Transfer Balance Cap will rise from $1.9 million to $2 million. This cap limits the amount that can be transferred from super into a tax-free account based pension or retirement income stream.
So, what does this mean for those approaching retirement? The increase allows retirees to allocate more funds into the tax-free pension environment. However, if you have already commenced an account based pension account, you may only an receive a proportional increase or none at all. I would strongly recommend that you get specialist financial advice if you have superannuation savings approaching this figure and want to check what extra amount you could add to the tax-free pension environment.
- Aged Care Funding model: From July 2025 there are significant changes to be implemented for aged care funding, impacting residential and stay at home care. The new ‘Support at Home Program’ is designed to provide tailored services and home modifications to allow eligible people over 65 to stay at home for longer.
However, the cost to move into an aged care home will significantly change for new residents from July 2025. The current funding model to cover the cost of care and support services is paid partly by the government and partly by the resident depending on their financial means and what type of aged care home and services. For new entrants from July, the means testing rules shift, resulting in higher costs for the resident with assessable assets above $500,000, and less of the funding provided by the government. Importantly, for those already in care before July 2025, the old assessment rules apply.
Wait and hold – Proposed changes
While there are a number of July changes to stay up to date with, there are also proposed changes that we must keep an eye on and it’s important that you know what is around the corner.
- Firstly, we will look at the frozen “deeming” rates that Centrelink use to determine how a pensioner’s income is assessed. Rather than look at the earnings for investments like bank accounts, direct shares and superannuation, Centrelink will apply assumed earnings rates ranging from 0.25% – 2.25%, which are historically low and have been since the economic uncertainty of the Covid period.
These frozen rates have been extended from 2020 and was due to expire 30 June 2025. With 460,000 Age Pensioners being impacting by the income test ‘deeming’ rules, there is concern that raising the deeming rates will negatively impact Age Pensioners with reduced fortnightly payments.
Prior to this freezing period the deeming rates ranged from 1.75% to 3.25% for the higher threshold. So stay tuned for the government updates, but there is an industry belief that freezing period will be extended.
- Another superannuation proposal that is getting media attention in the wake of the federal election is the proposal for an additional 15% tax on earnings for superannuation balances exceeding $3 million. This would impact approximately 80,000 Australians.
While this measure targets the wealthier retirees, the main opposition to this proposal is the uncertainty for the $3 million threshold being indexed in the years ahead, meaning more people being impacted over time as superannuation balances grow especially with higher contribution rates. Tax legislation has yet to be passed in parliament, but the drafted timeline was to commence from July 2025.
What’s not changing but resetting…
Lastly, let’s look at a couple of superannuation strategies that aren’t changing but resetting.
- Catch up contributions – The annual contribution limits that you can make to super remain the same, but they do reset for a new year. As mentioned before, the annual concessional or before tax contribution limit remains at $30,000 and you have a new year to work with. You should also check to see if you are eligible to carry forward any “unused” concessional contributions in the preceding 5 financial years. This measure essentially allows you to catch up on unused limits, provided that your total superannuation savings were below $500,000 at the preceding 30 June date.
My tip here is to check with your super fund or the ATO portal via your MyGov login for a history of unused contributions over the last 5 years.
- Contribution splitting – Contribution splitting is an interesting strategy and has been around for a while. This allows couples to transfer all or some of their concessional contributions made in the previous year. This can be a useful strategy for couples in the pre-retirement years trying to redistribute their superannuation wealth and effectively manage the limits that may apply later in the retirement years such at the Total Super Balance Cap and Pension Transfer Balance Cap.
The example below shows that Karen received $28,000 in total concessional contributions for the 2024/25 financial year. From July 2025, the couple could split up to 85% or in this case $23,800 to Darcy’s super as a rollover. The money stays inside the super environment, but just transferred to the spouse super account.
Importantly, there are eligibility criteria and you should get financial advice, before making decisions to split your contributions.
If any of these measures impact you and would like to understand how to navigate your retirement journey, you can speak with a financial planner at About Retirement.
Shaun Jones MAppFin (FP)
Financial Planner at About Retirement
