Negosentro | Super Steps: The 5 Most Important Milestones in the History of Superannuation in Australia | Superannuation has been around for more than a century, helping Australians prepare for and enjoy their retirement years. Of course, a lot has changed over the years, with a number of key moments having a significant impact on Australian history.
From the rise of Self-Managed Super Funds and SMSF accounting in the early 1900s to the tax laws set to take effect in 2025, here are the five most important milestones in the history of superannuation:
1. Laying the foundations
The first step toward Australia’s retirement preparation plan was established in 1909 with the launch of the Aged Pension. This gave Australians a bit of cushioning when they reached retirement age. However, more was needed to ensure people could be comfortable.
By 1915, superannuation investment accounts had been formalized to the extent that their gains were tax-free, while funds contributed by employers were tax-deductible. As marvelous as this all was, most of the benefits of superannuation were being experienced by men. To this day, due to wage disparity and other factors, women tend to have lower superannuation balances than male colleagues around the same age.
2. The superannuation guarantee
In the 1970s, just over 30% of Australians had super funds. Though the numbers were gradually increasing, progress was accelerated by the introduction of the Superannuation Guarantee (SG) in 1991.
The new law made it compulsory for Australian employers to contribute to employees’ super accounts. As a direct result, more than 80% of Australians had growing super funds by 1993. In 2022, the government increased the amount employers had to contribute to 10.5% of an employee’s wage.
3. A new take on SMSFs
Though SMSFs have technically been around since 1915, the self-managed funds Australians are familiar with today emerged in the late 1990s. These funds are crucial in helping small business owners and self-employed Australians prepare for retirement.
Though they don’t have employers to contribute on their behalf, self-employed contractors and business owners could establish an SMSF, allowing them to manage their own retirement investment plan. Though this process has certainly gotten easier over the years, it’s still complex and confusing enough that many people enlist financial professionals and SMSF accountants to handle the related investment decisions and tax obligations.
4. Fallout from the Global Financial Crisis
Australia performed remarkably well during the Global Financial Crisis, thanks in large part to the savvy leadership and well-timed stimulus packages of then-prime minister Kevin Rudd. However, the nation’s superannuation accounts still suffered, losing a combined total of AU$ 200 billion in the wake of the GFC. By 2010, the funds had returned to pre-GFC levels.
5. A new historical milestone is coming
At the moment, people drawing from superannuation accounts with balances of more than AU$ 3 million pay up to 15% tax each financial year. The new Labor government, elected in 2022, has announced a change to the superannuation tax laws that will see this rate double from 2025 onwards.
Though it’s being stubbornly opposed by the Liberal Party, this move will only affect the top 0.5% of Australians with sizeable superannuation balances. It will boost the government’s tax revenues by more than $2 billion a year, with the funds coming from those who can afford it most.
Whether you’re planning to settle down in Australia or are simply interested in how people plan for retirement around the world, it’s worth being aware of these major milestones in the history of superannuation.