There are now trillions of dollars tied up in Australia’s superannuation system, so it should come as no surprise that successive governments take an interest. The Your Future, Your Super reforms introduced on 1 July 2021 are the most recent example of this and are unlikely to be the last.
Those changes were designed to hold the system, and the super funds that manage that money, to account. On balance, this is a good thing, as long as the outcomes achieved are the best for members and their retirement savings.
In fact, superannuation in Australia has undergone constant change during its 150-year history, even though it’s only really in the last three decades that it’s become accessible to all working Australians.
So, let’s take a look at the highs and lows over time…
| Date | Change | Good, bad or average? |
|---|---|---|
| Pre 1900s | A private superannuation system was introduced in Australia around the mid-1800s, but only for a small minority of wealthy managers and some public sector employees. | Good for those it covered (it was nowhere near the super guarantee rate we have today), but bad for the majority of Australians that had no retirement income. |
| 1909 | The federal government introduced an age pension of £26 per year. This was paid to eligible men and women from 65. Then in 1910 the pension age for women was reduced to 60 years. | Good – Much better than no retirement income at all. |
| 1915 | The Income Tax Assessment Act 1915 introduced tax deductibility of employer super contributions made on behalf of employees. Super fund earnings were also made exempt from taxation. | Good – Made employers more likely to contribute. |
| 1920s – 1960s | Not much happened with regard to super, aside from a Royal Commission into a National Insurance scheme that would also cover retirement. | Average – A bit disappointing that so little progress was made over 40 years. |
| 1961 | Commonwealth government declared super fund investments would only be exempt from tax if they held a required amount of Commonwealth Bonds. | Bad – super has never escaped government meddling. |
| 1967 | Australia’s first employer-sponsored industry fund – the Stevedoring Employees Retirement Fund (SERF) – was established. Employers contributed 1.5 times the employee’s contribution rate, plus 100% for years of service back to 1942. | Good – The beginning of Australia’s industry super funds. |
| 1974 | 32% of Australian workforce covered by super – 36% male, 15% female. In the public sector 58% had super while in the private sector only 24% had super. | Average – Things were improving for Australian workers, but it was slow. |
| 1977 | Fraser Liberal government decided not to establish a national contributory super scheme following an inquiry the previous year that recommended a partial contributory scheme. | Bad – Pension alone not enough to fund retirement. |
| 1983 | The new Hawke Labor government expresses support for an employee super system. | Good |
| 1984 | Super fund for the building industry – CBUSS – created. The fund’s board consists of an equal number of employer and employee or union representatives. | Good – Another step in the right direction for super funds. |
| 1986 | Prices and Incomes Accord Mark 2 in which, the Hawke government and unions negotiate a 6% increase to wages, 3% of which was to be employer super. Accord Mark 2 was unsuccessfully challenged by employer groups. The National Wage Case then established guidelines for industry super funds to operate by. | Good – This was the beginning of the super guarantee (SG) as we know it today. |
| 1990 | 64% of all employees are covered by super. | Average – Still nearly 40% of the workforce not covered. |
| 1992 | The Labor government implemented the super guarantee – extending super coverage to 72% of workers. Employers were required to make super contributions on behalf of their employers on a scale of 3%, rising to 9% over the next decade. | Great – The start of compulsory super. |
| 1993 | Superannuation Industry (Supervision) Act 1993 (SIS Act) – the Act that governs and supervises super funds introduced. | Good – Provided a revised framework for the regulation of super. |
| 1996 | The superannuation surcharge – an extra 15% tax on certain contributions (usually from people on higher incomes) was introduced. | Bad – For those who had to pay it. |
| 1999 | A new category of super fund – the self-managed super fund (SMSF) – introduced via an amendment in the SIS Act. | Good – A new super option for the self-directed investor. |
| 2000 | 87% of workers covered by super. | Average – Still 13% falling outside the super safety net. |
| 2002 | Maximum age for super contributions increased from 70 to 75 for those working more than 10 hours a week. | Good – Helpful for building balances. |
| Also Family Law Act amended to include super as part of a couple’s assets for divorce. Super surcharge reduced from 15% to 12.5%. | Good – Provides equity in marriage breakdowns. | |
| 2003 | Super surcharge reduced from 15% to 12.5%. | Good |
| Co-contribution, whereby government would match an employee’s after-tax contribution into super, introduced for low/middle income earners. | Good – Provided a means for those with lower incomes to boost super. | |
| 2004 | Superannuation Safety Amendment Act 2004 requiring all super trustees of large eligible funds (not SMSFs) to be licensed. Super surcharge reduced further to 10%. | Good – Both good measures in terms of building balances and ensuring super funds were managed well. |
| 2005 | Super surcharge abolished and transition-to-retirement pensions (TTRs or TRISs) made available for those who haven’t yet retired or completely left the workforce. Choice of superannuation fund introduced. | Good – Less tax to pay on contributions and more flexibility around choice of super fund and retirement options. |
| 2006 | Liberal treasurer Peter Costello announces “Simple Super” which includes exemption of tax on super once retired if over 60, and no tax on a lump sum or a super pension. Costello also introduced the ability to make a one off $1 million after-tax contribution to super between 10 May 2006 and 30 June 2007 as long as the work test was met. | Good – The $1 million gave a lot of people who had not enjoyed the full benefits of compulsory super during their working life the opportunity to significantly boost their super. |
| 2008 | Same-Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Bill 2008 passes through Parliament. This Bill gave same-sex couples the same access to death benefits from super schemes or the tax concessions on death benefits as opposite-sex couples. | Good – Another step forward for equality. |
| 2009 | Annual limit on concessional contributions reduced from $50,000 to $25,000 for 2009–10 and beyond. Non-concessional contributions limit still $150,000. Caps subject to indexation. | Average – Limits ability to build balances. |
| 2013 | Scheduled increases in the super guarantee – from 9% to 12% – commenced with first increase to 9.25%. | Good – However it was stalled at 9.5% from 2014 to 2021. Increased to 10% in July 2021. |
| Division 293 tax introduced. Similar to the contribution surcharge, people on incomes of more than $300,000 required to pay an extra 15% tax on their super contributions. | Bad – Not great for those who had to pay. | |
| Those that make excess concessional contributions to be taxed at an individual’s marginal tax rate. | Average – Limits means by which people can boost super. | |
| 2017 | The investment earnings on transition-to-retirement pensions (TTRs or TRISs) no longer tax free and will be taxed at 15%. Non-concessional contributions cap reduced from $150,000 to $100,000, but will be indexed. | Bad – Means the strategy of reducing your work hours but still maintaining the same income (via TRIS) and contributing to super is no longer as tax effective. |
| Division 293 tax income limit reduced to $250,000 from $300,000. | Bad – more people required to pay more tax on super. | |
| Introduction of the transfer balance cap – the new limit on the amount of super that can be held in a tax-free retirement phase account or supporting a pension. The limit starts at $1.6 million but will be indexed. | Average – Transfer balance cap is designed to introduce more equity into the system but it also introduces more complexity. | |
| 2018 | Carry-forward rule introduced for concessional contributions if your overall super balance is less than $500,000. Applies from the 2019–20 financial year onwards. | Good – Means you can roll up unused contribution caps to get more into super. |
| Downsizer contribution introduced. From 1 July 2018, if you’re 65 years old or older and have owned your home for 10 years or more you can contribute up to $300,000 into super from the proceeds of selling your home. | Good – Allows another helpful boost to super that doesn’t count towards your contributions cap and is not impacted by the size of your total super balance. | |
| 2019 | Protecting Your Super reforms. Members with balances under $6000 or who are under 25 years old no longer have default insurance. | Average – Stops insurance premiums eating into low super balances but removes automatic insurance coverage. |
| Inactive low balance accounts (under $6000 and with no activity for 16 months) transferred to the ATO. | Average – stops fees eroding low balances but also stops those balances earning potentially higher investment returns. | |
| 2020 | Covid-19 early release of super enabled eligible super members to withdraw up to $20,000 across two financial years (this could then be recontributed back into super without it being counted towards the non-concessional contributions cap). | Bad – While potentially good for cash strapped Australians, it seriously eroded many people’s super balances – in some cases down to nothing. |
| Maximum number of SMSF members increases from four to six. | Average – Useful for some SMSFs that want to expand their membership. | |
| 2021 | Your Future, Your Super reforms – a new ATO online YourSuper comparison tool, the ‘stapling’ of fund members to their existing super fund, and tighter scrutiny of super funds’ MySuper products’ performance by APRA (with the regulator issuing regular reports on which funds are not meeting their benchmarks). | Average – The reforms were controversial with some professional bodies concerned members could be ‘stapled’ to underperforming funds. Better scrutiny of funds overall is probably a good thing as is the comparison tool. |
What’s the end result?
Overall super is better than it ever was but if the above table proves anything it’s that there will always be tinkering with super. Sometimes this tinkering will be favourable, while at other times maybe not so much.
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The bottom line is that it is prudent to take advantage of any favourable changes when the opportunity arises, because you can never be too sure they will be there next year.
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