With payday super now in force, increases in contribution caps and other major tax reforms, the following weeks will be one of the most important financial review periods in recent years, Andrew Buchan, partner at HLB Mann said.
Buchan said the suite of super and tax changes which have come into force since 1 July can create new opportunities to build wealth but also add complexity to retirement and investment planning.
“The beginning of a new financial year is the perfect time to take stock of your financial position. Even relatively small legislative changes can have a significant impact when they’re compounded over many years,” Buchan said.
“Many people only think about their finances at tax time, but some of the most valuable opportunities arise from planning ahead rather than looking backwards.”
From 1 July, the concessional superannuation contribution cap increased to $32,500, while the non-concessional contribution cap rose to $130,000. Eligible Australians under age 75 may also be able to contribute up to $390,000 using the three-year bring-forward provisions.
“These higher contribution caps provide greater flexibility for Australians looking to boost their retirement savings, particularly those approaching retirement who may have greater capacity to contribute after paying down debt or selling an asset,” he said.
“However, contribution strategies need to be carefully planned. Exceeding the caps or failing to consider your total superannuation balance can have unintended tax consequences.”
The Transfer Balance Cap and Total Superannuation Balance threshold will also increase to $2.1 million, potentially creating opportunities for retirees starting pensions or those considering additional super contributions.
Meanwhile, employees are expected to benefit from the introduction of Payday Super, requiring employers to pay superannuation alongside each pay cycle rather than quarterly.
“For millions of Australians, Payday Super means retirement savings begin working harder sooner. More frequent contributions can improve investment outcomes over time and also provide greater transparency, allowing employees to identify unpaid super much earlier,” Buchan added.
There will also be a modest tax relief, with the tax rate applying to income between $18,201 and $45,000 reducing from 16 per cent to 15 per cent.
“While the tax cut won’t dramatically change household budgets, every dollar counts in the current cost-of-living environment. It’s also an opportunity to consider directing some of that additional take-home pay into long-term savings or superannuation,” he said.
Buchan added that Australians should also keep a close eye on proposed Federal Budget measures affecting capital gains tax, negative gearing, SMSF property investing, discretionary trusts and the proposed Division 296 tax on super balances exceeding $3 million.
“People shouldn’t make major financial decisions based on headlines alone. Understanding what has changed and what is still only proposed is critical before restructuring investments or retirement plans,” Buchan said.
“Proactive financial planning has never been more important. The biggest risk isn’t necessarily missing out on a tax saving; it’s actually allowing your financial strategy to become outdated.”
He continued that while legislation, investment markets and personal circumstances can change over time, it’s also important to remember that a strategy that was appropriate five years ago, or even last year, may no longer be the most effective.
“Reviewing your superannuation, investments, insurance, estate planning and cash flow together, rather than in isolation, gives you the best chance of achieving your long-term financial goals,” he said.
