Australian Superannuation : A General Introduction
Superannuation is a tax effective form of long-term saving and investment which is intended to provide an individual with a pension or lump sum on retirement. By allowing investment returns to be sheltered within a superannuation vehicle the Australian Government is seeking to defray future retirement costs by having individuals make their own retirement provisions rather than relying on social welfare.
Australia’s superannuation rules are complex and while we have striven to have given as good a summary of the position as possible in these chapters it cannot cover all situations. We firmly suggest you pursue professional advice, either via an Exfin inquiry or other means, if you have specific issues regarding superannuation, or in relation to foreign pension transfers into Australia.
The Australian retirement system is relatively unusual in that members of retirement funds currently have far greater access to lump sums than in most countries. Hence, they have been referred to as "superannuation" funds rather than pension funds. Recent legislative changes are now encouraging benefits to be taken in the form of an income stream – but by providing incentives rather than legislation.
All Australian employers are currently required to contribute a minimum 9.5% of salary into a complying retirement fund for each of their employees. This is called the Superannuation Guarantee (SG) and the minimum contribution will increase gradually from 9.5% to 12% over the period to 2025/26. Exceptions to this requirement include individuals outside of the 18 to 70 age range and those currently earning less than $450 per month.
Successful negotiations between the Government and Opposition allowed the announcement of some significant changes to the rules surrounding superannuation on Thursday, September 15, 2016. They were quite detailed and we have updated the contents of this section of the website to reflect those changes - but have prepared a table summarising the major changes to superannuation which may be useful for expatriates.
Generally, the changes have effectively reduced access to both concessional and non-concessional contributions, with the result that expats will need to greater thought to continually managing their superannuation in Australia throughout their time overseas– rather than relying on being able to make large, non-concessional contributions, to superannuation on return to Australia.
Unfortunately, Australia's politicians seem unable to resist the temptation to continually tinker with superannuation, while hesitant to undertake a "root and branch" review of the system to ensure it remains relevant in a more constrained economic environment and with clear demographic challenges ahead. So, the only "sure thing" is that further changes in superannuation lie ahead.