Increased Superannuation Payments Set to Boost Retirement Savings
Starting July 1, Australian workers will see an increase in compulsory superannuation contributions, with the rate moving from 11.5% to 12%. This final scheduled increase aims to enhance the retirement savings of younger Australians, potentially allowing them to retire with over $600,000—an amount nearly three times greater than current averages.
According to the Association of Superannuation Funds of Australia (ASFA), a typical 30-year-old earning the median wage of $75,000 and with an initial super balance of $30,000 is projected to accumulate a superannuation balance of $610,000 by retirement. This contrasts sharply with the current median super balances for individuals aged 60 to 64, which are $205,000 for men and $154,000 for women.
Evidence suggests strong backing for superannuation from younger demographics, with 77% of those aged 18 to 34 advocating for the 12% contribution rate, while 82% feel that regular contributions bolster their financial confidence.
ASFA CEO Mary Delahunty expressed optimism about this engagement, stating, “Younger Australians show significant trust in superannuation, recognising its role in securing their financial future.” To achieve a comfortable retirement standard, ASFA estimates that singles need approximately $595,000, and couples need about $690,000—figures which assume retirees will draw down their capital alongside receiving part of the Age Pension.
Conversely, Super Consumers Australia suggests lower retirement savings targets, estimating that singles need around $310,000, while couples need about $420,000 to retire adequately. However, ASFA cautions that a 12% contribution rate may not suffice alone to ensure a comfortable retirement for today’s youth due to numerous factors that could impede their ability to save, including breaks from the workforce for childcare or gig economy job structures.
In addition to the contribution rate increase, other superannuation reforms will take effect on July 1. Those with superannuation balances exceeding $3 million will be subject to a higher tax rate on earnings above this threshold, which will rise from 15% to 30%. This change, which includes unrealised capital gains, is awaiting legislation. Furthermore, superannuation contributions will soon apply to Parental Leave Pay, effectively adding 12% to government support payments for parents.
Additionally, the transfer balance cap—limiting the amount of superannuation that can be transitioned into the retirement phase—will increase from $1.9 million to $2 million. Misconceptions about changes to preservation and withdrawal rules have circulated; however, the Australian Taxation Office has clarified these are unfounded concerns.
As Australia’s superannuation landscape evolves, these changes signify a proactive step towards enhancing the financial security of future retirees.
