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 increasingly complex and, while we have striven to have given as good a summary of the position as possible in these chapters, we cannot cover all circumstances. We strongly suggest that 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 superannuation funds currently have far greater access to lump sums, rather than for example annuity income streams, than in most countries. Hence, they have been referred to as "superannuation" funds rather than pension funds.
All Australian employers are currently required to contribute a minimum 9.5% of salary (ordinary time earnings) into a complying superannuation 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.
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 at the time we prepared a table summarising the major changes to superannuation which may still be useful for expatriates looking to update their understanding of the current system.
Generally, the changes effectively reduced access to both concessional and non-concessional contributions, with the result that expats need to give greater thought to how they continually managing their superannuation in Australia for best effect during their time overseas– rather than relying on simply being able to make large, non-concessional contributions, to superannuation on their 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 yet further changes in superannuation lie ahead and, to a degree, financial planning for expatriates needs to be undertaken with this in mind, and include some degree of flexibility.