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Key Changes For 2025 You Should Know
As we move closer to 2025, there are some important updates that could have an impact on your retirement plans. Whether you’re getting ready to retire or already enjoying it, knowing about these changes can help you make smarter decisions. Here’s a straightforward breakdown of what’s coming and how it might affect you.
1. Overhaul of the Refundable Accomodation Deposit (RAD) - Aged Care
Starting January 1, 2025, the maximum refundable accommodation deposit (RAD) for aged care is increasing from $550,000 to $750,000.
Currently, the maximum RAD that a service provider can charge without specific approval from the Aged Care Pricing Authority is not indexed and has never been increased to account for the increase in construction costs and inflation. While cheaper rooms will still be available, this change will enable facilities to set higher room prices without the administrative burden. This change will not impact the cost of care for residents in care prior to 1 January 2025.
If you or a loved one are exploring aged care options, it’s important to factor this higher upfront cost into your plans.
What does this mean for you?
- If you are entering Aged Care after 1 January 2025, you may be asked to pay up to $750,00 for your refundable deposit (RAD)
- Families may need to start being more proactive in their approach to Aged Care, whether that be saving towards the RAD or seeking advice on how the RAD can be funded.
- Those with substantial home equity might find this easier to manage
For more on changes to Aged Care costs, read our recent blog, “Residential Aged Care Changes – What Could They Mean For You?”
2. Super Contributions Are Going Up
If you’re still working, there’s good news! From July 1, 2025, employers will increase their superannuation contributions to 12% of your salary, up from 11%. If you’re already making extra contributions or using salary sacrifice, now’s a good time to review your strategy and make sure you’re maximizing your benefits.
What does this mean for you?
- Employees will see more money flowing into their super accounts
- Potential reduction in take-home pay for those under ‘total employment cost’ arrangements
- Small business owners will need to adjust their payroll systems
You should review your salary sacrificing arrangements to ensure that you are not going to exceed your Concessional contribution cap
3. New Tax For Large Super Balances
The proposed Division 296 tax is an additional tax of 15% on ‘calculated earnings’ applied to individuals with a total super balance above $3 million for 2025/26 and future financial years.
This is in addition to the existing super fund tax rate. If passed, the ATO’s first assessments will be made for the 2026/27 financial year.
The House of Representatives passed the Bill without amendment, but it has not progressed through the Senate since it was introduced. Parliamentary sittings for 2024 ended on 28 November 2024 and the Bill did not pass the Senate.
This means the earliest the Bill can become law is in the February sittings, which are scheduled for 4 to 13 February 2025. If an election is called prior to the February sittings, the Bill will lapse.
While this controversial new tax system is not finalized yet, this is a good reminder to review your superannuation strategy —especially if you’re in the high-net-worth category. Being prepared now can help you avoid
surprises later.
4. End of the Deeming Rate Freeze
Deeming rates, which are used to calculate income from investments for pension purposes, have been frozen until June 30, 2025. If the freeze isn’t extended, higher rates could reduce some retirees’ pension payments.
The current deeming rates are historically low and have not been adjusted in line with the RBA interest rate moves. Current deeming rates are calculated as per below;
Single
The first $62,600 of financial assets is deemed to earn 0.25% per year, and anything above that is deemed to earn 2.25%
Couple (at least one partner receives the pension)
The first $103,800 of combined financial assets is deemed to earn 0.25%, and anything above that is deemed to earn 2.25%
What does this mean for you?
- People who are on the Age Pension may see their assessable income increase and therefore could have their fortnightly payments reduced. In some cases where people are receiving a small part pension they might exceed the income test and have their pensions stopped.
- If you are receiving Commonwealth Seniors Health Card (CSHC) benefits, if your new assessable deemed income exceeds the income limits, you may lose your entitlements. For more on the income limits for CSHC, visit the services Australia website here.
It is unknown at this stage if deeming rates will be unfrozen, and if so what the new deeming rate will be. With any new information we will be assisting clients with calculating their benefits and reviewing their retirement income strategies.
5. Last Chance for Catch-Up Super Contribution
If you haven’t fully used your super contribution caps from past years, you have until June 30, 2025, to take advantage of the “catch-up” rules. This is especially useful if your super balance is under $500,000 and your contributions were lower in previous years. It’s a great way to boost your retirement savings and take advantage of tax benefits.
What does this mean for you?
- The “catch up” contribution cap goes back over the past 5 years on rolling basis, so this means that this financial year will be your last chance to use up cap space from the 2019/20 financial year.
What Should You Do Now?
These changes show why it’s important to stay on top of your financial plans. Here are a few steps to help you prepare:
- Review Your Super: Look at your contributions and see if you’re eligible for catch-up opportunities
- Plan for Aged Care: Think about strategies to manage higher RADs and new fee structures.
- Stay Updated: Keep an eye on legislative changes, like the proposed tax on large super balances and deeming rates.
- Get Expert Advice: Speaking to your financial adviser at P3FP who can help you tailor your plans to suit your needs.
Need Help Making Sense Of It All?
If you’re unsure how these updates might affect your retirement, we’re here to help. Book a consultation with us today and make sure you’re ready to take advantage of the opportunities 2025 brings.
Planning for the future doesn’t have to be stressful. With the right advice and a clear strategy, you can face the changes ahead with confidence and enjoy your retirement to the fullest.
Disclaimer: The information in this article is general and does not consider your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken and refer to the relevant Product Disclosure Statement before investing in any product. P3 Financial Planning Pty Ltd ABN 61 009 883 292 AFSL 464628
