When did superannuation start in Australia?

Employer-based superannuation has been a feature of employment in some Australian industries from the mid-1800s, but mostly for public service employees and financial sector workers.

From the 1950s to the 1970s, superannuation began to act as a supplement to the Age Pension for mostly white-collar workers. From the 1970s through to the mid-1980s, while superannuation expanded in workforce coverage, it was still considered a ‘fringe benefit’ concentrated among professionals, public servants and finance sector workers.

The arrival of universal super for all employees had its beginnings in 1986 when the Conciliation and Arbitration Commission – with the support of the Hawke Government – announced it would approve awards that provided contributions of up to 3% to approved super funds.

When did compulsory superannuation start in Australia?

Compulsory super payments, often referred to as the Superannuation Guarantee (SG), were formally introduced on 1 July 1992 with minimum employer contributions of 3% of OTE (Ordinary Time Earnings). This ensured coverage for almost all employees.

And in 1993, the Superannuation Industry (Supervision) Act 1993 (SIS Act) was passed. The SIS Act provides a legislative framework that ensures superannuation funds are managed in the best financial interests of members. It is designed to enhance transparency, promote high standards of conduct, and protect the retirement savings of millions of Australians.

Why is superannuation compulsory in Australia?

Compulsory superannuation ensures that every working Australian saves for their retirement.

The Association of Superannuation Funds of Australia (ASFA), the peak body on all things super, had this to say about compulsory super: “Our compulsory superannuation system underpins what ASFA considers the core objective of the Australian superannuation system – to provide an adequate income to ensure all Australians achieve a comfortable standard of living in retirement, supplementing or substituting the Age Pension.”

The role of superannuation in securing your retirement

Retirement planning is a vital part of life that everyone should prioritise. Proper retirement planning brings peace of mind and can help ensure a comfortable life in your later years.

The Australian Government developed superannuation to assist people in planning for their retirement years.

One of the key advantages of superannuation is its tax benefits. Contributions to your superannuation account are taxed at 15%, which is significantly less than marginal tax rates (which can be as high as 47%, including the Medicare levy). And once you reach your preservation age (age 60), withdrawals from your superannuation account are tax-free, further enhancing super’s benefits.

The importance of superannuation

The three pillars of Australia’s retirement income system are:

a publicly funded and means tested safety net in the form of the Age Pension
compulsory savings through SG contributions, and
voluntary savings through additional superannuation contributions and other financial or non-financial assets.

Australia's 'second pillar,' the super system, stands out for several reasons. Unlike similar schemes overseas, it is compulsory that most workers have some of their salary contributed to the super system.

One reason for the introduction of compulsory superannuation was to address concerns that people do not voluntarily save enough for their retirement. Compulsory superannuation allows people to achieve a higher level of retirement income compared with relying solely on the Age Pension. When first introduced, compulsory superannuation was also seen as an important mechanism for increasing national savings and improving the flexibility of future government budgets in the face of an ageing population.

It has been nearly 35 years since the introduction of compulsory superannuation. Since then, the total amount of money managed by super funds has grown to around $4.3 trillion¹.

When did superannuation start in Australia? An overview of its history and importance