As per usual, 1 July means new legislation kicks in and top of mind for a lot of advisers will be the Division 296 superannuation tax changes that will see earnings on super balances over $3 million taxed an additional 15 per cent. This applies as of 1 July 2025.
The biggest issue here, though, is that the legislation hasn’t actually been passed yet, largely because the new Parliament is yet to assemble following the federal election. However, Labor has stated that it intends to go ahead with the legislation as is and with its major win, it will have the power to do that.
As such, James O’Reilly, founder and financial adviser at Northeast Wealth, told ifa that one of the biggest things on his mind at the moment is the need for clarity around Division 296 because it is hard to plan for legislation when you don’t know the exact details.
“Labor has sufficient majority to enact it in its current form ($3 million super cap, unindexed, no grandfathering, tax on unrealised gains) but hopefully, some common sense is applied to unrealised gains in particular,” O’Reilly said
“In most cases, we’re holding off until proposals are finalised. Taking Div 296 as an example, I’ve seen the argument for reducing super balances below $3 million as of 1 July 2025.
“The risk is that the proposal changes prior to legislation and people remain better off retaining balances above this figure. It’s much harder to get money into super than out of super – and especially at high volumes – so we’ll await more certainty.”
With taxes proving a key topic throughout the recent election, particularly in the context of providing cost-of-living relief, O’Reilly said he expects to see meaningful tax legislation over FY2025–26.
Namely, he noted the non-deductibility of ATO interest charges set to come into effect from 1 July, which could impact business owners considerably.
“Many of our members are business owners, and those carrying ATO debt are now paying the full whack on their (currently) 10.78 per cent. The former tax deduction on this debt made the rate far more defensible, but we’re pressing members to clear ATO debt as a high priority,” he said.
For independent financial adviser Nathan Fradley, the incoming aged care reforms, which were meant to come into effect on 1 July but have since been pushed back three months, are top of mind now as he guides clients through this challenging space.
“Aged care changes are the main one for me, especially with the extension to November 1 giving those clients who are on the fence about entering care a bit more breathing room from RAD retention,” Fradley told ifa.
Though, beyond client-related legislation, Fradley said he is also hoping to see progress on the Delivering Better Financial Outcomes (DBFO) reforms, but he doesn’t expect to see this too soon.
“I’d love to see decent reforms following the DBFO draft 2.0 and consultation that give advisers breathing room. I’m expecting to see nothing of any real weight just yet. The new minister needs time to settle in,” he said.
On top of this, advisers are concerned, and rightly so, about the Compensation Scheme of Last Resort, with Fradley saying he is “just waiting for one or two more blow ups” in the hopes that this could trigger real change; however, the outlook at the moment is quite grim.
“It’s going to get worse before it gets better, but this will highlight how poorly designed its funding model is even further,” he said.
Despite the challenging nature of being an adviser at the moment though, Fradley suggested that “if you’re a great adviser, with a clear value proposition, giving a great client experience to the right clients” then it is still a great time to be a part of this profession.
Global markets: Expect the unexpected
While being prepared for the unexpected is always important for advisers, the last few months in particular have highlighted just how true this is following US President Donald Trump’s so-called “Liberation Day” in April that saw markets across the world shaken.
Given this, Fradley suggested that knowing what might happen next is nearly impossible, meaning that being prepared for the inevitable swings is a must.
“A roll of a 100-sided die would have a better chance of guessing what will happen in the next 12 months in the current environment,” he said.
“Ultimately, there is always something to worry about in markets. If no one is worried, no one is making money.”
Overall economic factors are, of course, an important factor as well, with O’Reilly suggesting that “it’s hard to remember a time where there was so much economic uncertainty” as Australians continue to deal with inflation, delayed rate cuts and high global tension.
“Given the current economic backdrop, some valuations are stretched and I’m doubtful we’ll continue to see the earnings growth needed to justify these prices,” he said.
Though the last few years have really shown us to always expect the unexpected, when asked if there was anything else he was worried about over the next 12 months, O’Reilly said, “I bloody hope not!”, likely capturing the feeling of many advisers right now.
Uncertainty! Seems to be the buzzword for the last 30 years.
What works is always the basics.
Regular contributions towards saving for the future and eliminating debt as quickly as possible.