As a financial advisor, it’s crucial to understand how the outcomes of the Australian Federal Election can influence the financial well-being of various demographic groups. The 2025 election presents several policy proposals that could significantly impact the financial positions of everyday Australians, particularly those aged 20-40, 40-60, and retirees. While geopolitical tensions are inflamed around the world and the outcomes of the US trade wars will influence Australia’s economic stability, everyday Australians are looking at what major parties propose to provide relief to households and measures they take to improve the lives of many who are currently struggling to make ends meet.
In this article, we’ve segmented the potential impacts for each demographic.
For Australians aged 20-40years
For this age group, there are three primary considerations: employment and income, tax and cost of living, and housing affordability.
The proposed increase in the compulsory employer superannuation contribution from 11.5% to 12% effective July 1, 2025, will bolster retirement savings for this cohort. While this increase is mainly positive, remaining vigilant about potential repercussions is crucial. One concern is that some employers might adjust wages in response to the higher superannuation contributions. This could involve freezing wages or reducing them to offset the increased superannuation costs. Such actions could negate the benefits of the increased superannuation contributions, as workers might find their take-home pay reduced. This change could also impact business profitability and investment.
Ongoing discussions explore the possibility of adjusting the Goods and Services Tax (GST) rate to influence and manage prevailing economic conditions. Such adjustments could directly impact disposable incomes for individuals and households across the country. An increase in the GST rate would effectively raise the prices of goods and services, consequently reducing the purchasing power of disposable income. Conversely, decreasing the GST rate could boost disposable income by making goods and services more affordable.
In addition to the GST considerations, proposals are being discussed to increase the tax-free threshold by $10,000 per child. This measure is specifically targeted at providing financial relief to young families. Raising the tax-free threshold means families with children could earn more income before becoming liable for income tax. This would effectively increase their disposable income, allowing them to allocate more funds towards essential needs such as housing, food, education, and healthcare. This initiative acknowledges young families’ financial pressures and aims to enhance their financial well-being.
Policies allowing the use of superannuation for home deposits are under consideration. While this could facilitate home ownership, the long-term impact on retirement savings must be considered. If a large number of people access their superannuation early, it could put pressure on the system and lead to lower investment returns for all members.
Therefore, any policy changes that allow for the use of superannuation for home deposits must be carefully designed and implemented to ensure that they do not harm retirement savings. This could involve limiting the amount of superannuation that can be accessed, requiring individuals to receive financial advice before accessing their superannuation, or providing incentives to replenish their superannuation balance after using it for a home deposit.
For Australians aged 40-60years
The considerations for Australians in this bracket are similar, albeit with differing motivations: employment and income, tax and cost of living, and retirement planning.
The rise in compulsory superannuation contributions may affect take-home pay, depending on employer wage adjustments. It is recommended that individuals review their household budgets and spending patterns to assess how the change in take-home pay may affect their day-to-day finances. If necessary, adjustments can be made to spending habits to accommodate the change.
It is important to remember that this is a long-term investment in one’s retirement savings. The additional contributions will accumulate over time, providing individuals with a more substantial nest egg when they retire. Individuals should also seek professional financial advice to optimise their overall financial strategy, including superannuation contributions.
Adjustments to the GST and potential increases in the tax-free threshold per child could influence financial planning, especially for those supporting dependents. It is important to stay informed about these potential changes. It allows individuals and families to anticipate the impact on their financial situation and make necessary adjustments to their financial plans. This may include reviewing household budgets, adjusting savings goals, and exploring different investment options.
In addition to the potential changes mentioned above, it is also important to consider other factors that could impact financial planning, such as changes in interest rates, inflation, and economic conditions.
Retirement planning will be front and centre for this cohort. The increase in the transfer balance cap from $1.9 million to $2 million allows for more substantial tax-free pension phase balances, benefiting those nearing retirement. However, introducing a 15% tax on superannuation balances that exceed $3 million (DIV296 Tax) introduces a new layer of complexity for high-net-worth individuals. This proposed tax may necessitate reevaluating retirement strategies for those with significant superannuation balances. It could lead to a shift in investment strategies, an increased focus on estate planning, or a greater emphasis on utilising superannuation benefits before reaching the $3 million threshold.
Overall, while the increase in the transfer balance cap is broadly beneficial for those nearing retirement, the proposed tax on high superannuation balances highlights the importance of personalised financial advice and proactive retirement planning, particularly for high-net-worth individuals.
Retirees in Australia
The Federal election is as critical for retirees as those still working and managing families. The three primary considerations facing retirees are: Superannuation and taxation, cost of living and pensions, and healthcare and aged care.
The proposed 15% tax on superannuation balances over $3 million (DIV296 Tax) could impact retirees with substantial superannuation savings. This tax burden could affect their retirement plans and financial stability. Moreover, the uncertainty surrounding the taxation of unrealised gains has raised concerns among investors. This necessitates a thorough review of investment strategies to ensure compliance with the new tax regulations and to optimise financial outcomes in light of these changes.
The stability of retirement income in Australia is facing significant challenges, causing growing concern among retirees and policymakers. A key issue lies in the deeming rate, a crucial factor in determining pension entitlements. This rate, which assumes a certain income level from financial assets, has remained stagnant since May 2020, despite substantial shifts in economic conditions since then. This discrepancy has led to calls for an urgent reassessment of the deeming rate to ensure it accurately reflects the current economic reality and provides fair and adequate support to retirees.
Additionally, the age pension system is grappling with a substantial backlog of nearly 34,000 claims, indicating systemic inefficiencies and delays in processing. This backlog creates financial hardship for those awaiting their pensions and raises questions about the system’s capacity to handle the needs of an ageing population. Addressing these systemic challenges is essential to ensure timely and efficient delivery of age pension benefits and to maintain public trust in the retirement income system.
The aged care sector in Australia is undergoing a series of substantial reforms aimed at enhancing the quality of care and support provided to older Australians and not before tme. These reforms are driven by a growing recognition of the diverse and evolving needs of the ageing population and the imperative to ensure a dignified and fulfilling experience for all older Australians. The key areas of focus within these reforms include:
- Prioritisation of aged care
- Addressing workforce shortages
- Improving access to services
These critical issues have been prominently featured in the election discourse, with political parties outlining their proposed policies and commitments to enhance the aged care system.
The upcoming 2025 Australian Federal Election introduces policy proposals with varying financial implications across different age groups. Staying informed and dissecting the ramifications directly influencing you is essential when planning the financial outcomes of Government policy changes or the status quo. Engaging a professional and qualified financial advisor is advisable to ensure you remain on track and ready to meet the challenges of whatever party is in charge of the public purse strings.
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