The retirement or pensions system in Australia is called Superannuation. Australia’s mandated Superannuation Guarantee (SG) system was established in 1992 and requires all employers to make superannuation contributions on behalf of their employees. Australia’s superannuation system is primarily made up of accumulation or defined contribution funds and is now one of the largest pension systems in the world.
Employers in Australia are required by law to make at least minimum superannuation payments, or contributions, for all eligible employees. This compulsory minimum is called the super guarantee (SG) and is currently 9.50% (though this is currently legislated to rise to 12% by 2020). The SG is in addition to the salary or wages that are paid.
Employees who are temporary residents and employees working temporarily overseas are entitled to SG contributions under the same criteria as other employees. In some instances, contract workers are entitled to SG.
Employees must be offered either to choose their own super fund/retirement savings account or utilise the employer-nominated or default fund.
Employers must pay super regularly by the due date each quarter for each and all eligible employees. The payments are tax-deductible in the financial year paid; however, if the payment obligations are not met on time (quarterly), the deductibity entitlement will be lost.
The Australian Prudential Regulatory Authority (APRA) regulates superannuation funds other than Self- Managed Superannuation Funds which are supervised directly by the Australian Taxation Office.
Australia has a globally significant pool of superannuation assets totalling more than A$1.62 trillion. There are a number of different types of Superannuation fund types. These are:
- Self-managed superannuation funds (SMSFs) (31.4%)
- Retail Super funds (26.1%)
- Industry Super funds (20.1%)
- Public sector funds (15.9%)
- Corporate funds (3.8%).
(Source: APRA Annual Superannuation Bulletin – June 2015)