Non-qualified plans might sound like jargon from Wall Street, but they’re starting to make waves in Australia, especially as our workforce becomes more global and business structures more complex. As of 2025, regulatory and tax changes are prompting business owners, executives, and high-income professionals to take a closer look at these alternative compensation strategies—especially those with overseas ties or flexible retirement needs.
What Are Non-Qualified Plans? (And Why Should You Care?)
Unlike traditional superannuation, non-qualified plans are not subject to Australia’s standard contribution and benefit limits, nor are they universally regulated by the Australian Prudential Regulation Authority (APRA) or the Australian Tax Office (ATO) in the same way. In essence, they are employer-sponsored deferred compensation arrangements that do not meet the formal requirements (the ‘qualification’) for preferential tax treatment under super law.
Here’s why they matter in 2025:
- Global Talent Mobility: Many multinational companies offer non-qualified plans to attract and retain executives who may not be eligible or optimally served by Australian super alone.
- Flexibility for High Earners: These plans can provide tailored retirement or bonus structures outside of super caps, appealing to professionals who regularly max out their concessional and non-concessional contributions.
- Succession and Retention: Business owners use non-qualified plans to lock in key talent, providing long-term incentives that are not tied to superannuation rules.
Key Differences: Non-Qualified Plans vs. Superannuation
Understanding the distinction between non-qualified plans and super is crucial for making informed financial choices.
- Tax Treatment: Contributions to non-qualified plans are typically not tax-deductible for employers, and may be taxed as income to the employee upon vesting or distribution. In contrast, super contributions (within limits) are taxed at concessional rates.
- Contribution Limits: Super has strict annual caps ($30,000 for concessional and $120,000 for non-concessional in 2025). Non-qualified plans are not bound by these limits, offering more flexibility for large bonuses or deferred income.
- Regulatory Oversight: Super is highly regulated, with mandatory preservation ages and strict release conditions. Non-qualified plans are governed more by contract law and less by statutory rules.
- Risk: Non-qualified plans are often unsecured; if the employer becomes insolvent, participants may become general creditors. Superannuation funds, by contrast, are protected by trust structures and government safety nets.
Example: An executive at a global tech firm in Sydney may be offered a non-qualified deferred compensation plan that pays out after five years of service, in addition to her super. This allows her to save more for retirement than the super caps would permit, but with different tax and risk considerations.
2025 Trends and Policy Updates Affecting Non-Qualified Plans
Several recent shifts are impacting how non-qualified plans are being used in Australia:
- ATO Scrutiny on Deferred Compensation: The ATO has signalled increased attention on cross-border executive compensation, especially where non-qualified plans are used to defer income tax. As of July 2025, new reporting requirements apply for employers offering these plans to tax residents and inbound expats.
- Super Cap Increases: While super caps have risen for 2025, many senior professionals still exceed these thresholds—making non-qualified plans a popular supplement, especially as employers seek to compete for scarce talent.
- Flexibility Demanded by Remote and Hybrid Work: With more Australians working for overseas companies or taking contract roles, non-qualified plans offer an adaptable way to structure incentives, sometimes in combination with Employee Share Schemes (ESS) or phantom equity arrangements.
- Legal Caution: The government has warned about the lack of consumer protections for non-qualified plans, urging participants to review plan solvency and legal terms carefully.
Should You Consider a Non-Qualified Plan?
Non-qualified plans aren’t for everyone, but for certain Australians—especially business owners, high-income earners, and those working for global firms—they can be a valuable part of a broader financial strategy.
- Best for: Executives who’ve maxed out super, business owners seeking bespoke retention tools, and expats with complex tax profiles.
- Things to watch: Solvency risk, tax timing, cross-border compliance, and the fine print of any plan agreement.
If you’re being offered a non-qualified plan in 2025, ensure you understand the structure, risks, and tax implications—especially in light of new reporting rules and changing global workforce trends.
