Superannuation strategies for the 2025 end of financial year
As we approach the end of the 2025 financial year, it is important not to forget long term planning for retirement and to make sure you’re getting the most out of your super. Here are some of the key strategies to review with your super before 30 June 2025:
Your total superannuation balance on 30 June 2024. This is the total of all your superannuation accounts and may influence whether you can make non-concessional (after tax) contributions to super, your eligibility to access the ‘three-year bring forward’ opportunity, your eligibility to access unused concessional caps from previous years, the ability to qualify for the extended work test exemption, your eligibility to receive Government co-contributions and a tax offset for any spouse contributions you may make.
If planning to make additional superannuation contributions, remember they need to be made before 30 June. Consider making contributions well in advance of the end of the year to ensure they are received by your super fund on time. Contributions made by electronic funds transfer e.g., BPAY, are not deemed to have been made until the money appears in your super funds bank account. This could be some days after you initiate the transfer.
Concessional contributions include contributions made by an employer such as the 11.5% superannuation guarantee, salary sacrifice contributions and personal tax-deductible contributions. The maximum concessional contributions that may be made this financial year is $30,000.
Even though the work test that applies to superannuation contributions made up to age 75 has been removed, for people aged between 67 and 75 who wish to claim a tax deduction for their personal superannuation contributions, they will still need to meet a work test before 30 June 2025.
Concessional contribution carry-forward. If your total superannuation balance (i.e., the balance of all your superannuation accounts added together) on 30 June 2024 was less than $500,000 and you did not use all your concessional contribution cap in, 2019-20, 2020-21, 2021-22, 2022-23, or 2023-24 you may be able to carry the unused portion of previous year’s cap forward and contribute it in the current financial year. Any unused cap from 2019-20 will not be available from 1 July 2025.
If planning to claim a tax deduction for personal superannuation contributions, you need to provide your superannuation fund with a Notice of Intent (to claim a tax deduction) before you lodge your income tax return, and before certain other events occur. We can assist you to ensure the appropriate documentation has been lodged.
Non-concessional contributions are contributions made from after-tax income and from other savings. The maximum amount that can be contributed this year is $120,000, or up to $360,000 using the three-year bring forward rule. However, if your total superannuation balance on 30 June 2024 was more than $1.9m, you cannot make any non-concessional contributions. If it was between $1.66m and $1.9m, the maximum that can be contributed under the three-year rule reduces.
It is also worth remembering that if you made non-concessional contributions of more than $110,000 in 2022-23 or 2023-24, the amount you can contribute this financial year may be limited.Do you hold insurance through your super? If so, your insurance cover may be cancelled in some circumstances if you haven’t taken certain steps. In general terms, if your super account is inactive (i.e., a contribution or rollover is not made within a period of 16 months), or if your account balance falls below $6,000, your insurance will be cancelled. However, you may retain your insurance by either contributing to your super fund, or by electing to retain your insurance.
Planning to buy your first home? Voluntary contributions made to super since 1 July 2017 may be withdrawn for the purpose of buying your first home under the First Home Super Saver Scheme.
Are you aged 55 or older and have recently sold your long-term family home? If so, you may be eligible to contribute up to $300,000 of the sale proceeds to superannuation. However, conditions apply, and contributions need to be made within 90 days of receiving the sale proceeds.
If your total income is less than $60,400 and you receive at least 10% of your income from employment or self-employment, and you make a personal non-concessional contribution to super, you may be eligible to receive a Government co-contribution of up to a maximum of $500.
People who contribute to super for their spouse may be eligible to receive a spouse contribution tax offset of up to 18% of the amount they contribute, subject to a maximum offset of $540. A spouse contribution tax offset is available where an eligible spouse for whom a contribution is made has income of less than $40,000.
With the introduction of limits people may now have in a superannuation pension account, the ability to split contributions between spouses, and therefore move towards equalising super, is more important than ever. There is still time to split concessional contributions. Up to 85% of concessional contributions made in 2023-24 may be transferred to a spouse’s account before 30 June 2025. Certain conditions apply.
Back in July 2017 we saw the introduction of the ‘transfer balance cap'. In simple terms, this limits the amount that may be transferred to a super pension or income stream (these terms are interchangeable). The transfer balance cap is currently $1.9m, however it will increase to $2,000,000 from 1 July 2025. Deferring the commencement of a pension until after 1 July 2025 may be advantageous for some clients.
There are occasions when concessional or non-concessional contributions to super will exceed the permissible limits. If this happens, the Australian Taxation Office will issue an excess contribution determination. If you receive a determination, you should contact us immediately, even if you think an error has been made. There are strict timeframes that must be followed to minimise penalties.
Are you running a small business and have sold the business or any business assets during 2024-25? If so, you may be eligible to take advantage of the small business capital gains tax concessions. Not only do these concessions save you tax, but you may qualify to make additional contributions to superannuation without being constrained by the contribution caps.
There is currently around $16bn of lost and unclaimed superannuation being held by the Australian Taxation Office on behalf of Australians. We can assist you in searching for any lost superannuation you may be entitled to.
One of the attractions of superannuation is the ability to draw a tax effective income once you retire. However, to receive favourable tax treatment, a minimum prescribed amount of income must be drawn each year. We can check to ensure you have drawn the appropriate amount of income before 30 June 2025.
Superannuation pensions are not solely reserved for those who have retired, but people who are approaching retirement age may also draw a pension from their super under ‘transition to retirement’ rules. It is important that if you are receiving a transition to retirement pension and you retire, particularly if before turning 65, you should inform your super fund or us immediately. Doing so may deliver you additional tax savings.
The money a person has in superannuation does not automatically form part of their estate when they pass away. There are several options available for a person to nominate a beneficiary to receive their super in the event of death, however, the rules are complex. We encourage all clients to make appropriate death benefit nominations. If a nomination was made in the past, it is important to review it from time-to-time to ensure it remain current.
If you have any questions about the issues raised, or if you would like us to review your circumstances or simply check that everything is on track, please don’t hesitate to contact us to discuss further.