As of July 1, 2023, Australian employers will be required by law to contribute a minimum of 11 percent of a worker’s salary to their superannuation fund, up from the previous rate of 10.5 percent. This rate will continue to rise by 0.5 percent each year until it reaches 12 percent by July 2025.
Industry Super Australia estimates that approximately 8.8 million Australians will experience a boost to their retirement savings, with the average worker benefiting by $330 per year. According to their projections, a typical 30-year-old worker can expect an additional $48,600 in their superannuation account upon retirement under the new regulations.
The primary beneficiaries of this year’s increase will be younger individuals and those with lower incomes, with approximately 60 percent of the workers benefiting earning less than $75,000.
Furthermore, Treasury estimates that this year’s increase, though seemingly modest, will add over $21,500 to the final superannuation balances of recent school leavers who work in low or middle-income positions until the new age pension age of 67.
Women who take extended breaks from their careers to give birth and care for children will see an improvement of at least $17,000 in their retirement savings.
Even older Australians approaching retirement age will experience significant financial gains.
Treasurer Jim Chalmers emphasized that if the Liberal Party had not repealed the superannuation guarantee increases in 2014, Australian workers would have reached the 11 percent threshold in 2017 and 12 percent in 2019.
“We have always supported the superannuation guarantee, which is now increasing to 11 percent,” Chalmers stated. “This means that more hardworking Australians will have more money for their retirement. We believe that every Australian deserves a dignified retirement, and that is why the superannuation guarantee is so important.”
Bernie Dean, the CEO of Industry Super Australia, highlighted that the gradual increase to 12 percent would have a significant impact on workers’ retirement savings, stating that the average 30-year-old worker on the median wage will accumulate an average super balance of $500,000 by retirement.
“While the incremental increases may seem small, they will result in substantial savings, providing a more secure future for millions of Australians,” Mr. Dean said. “The individuals who will benefit the most from the superannuation guarantee increase are younger workers with lower incomes, as they have many years ahead of them to witness the growth of compound interest.”
Dr. Chalmers took a dig at the Liberals for their attempts to halt the superannuation guarantee increases, expressing doubt about their commitment to “safeguarding the future of super.”
“Labor has been instrumental in building Australia’s superannuation system, and we take pride in it. We will continue working to strengthen it,” he added.
Other changes to superannuation include the expiration of the temporary reduction on minimum super drawdown rates, which was introduced by the Morrison government in response to the Covid-19 pandemic. Retirees who opted for this measure were only required to withdraw 50 percent of the age-based minimums to assist them during the crisis.
Additionally, individuals with more than $3 million in their superannuation accounts will face an additional 15 percent tax on their earnings starting from July 1 next year.
