What is Superannuation?

Not all super funds are the same. Understanding the type of fund you are in helps you make better decisions about your retirement savings.

• Industry Funds Industry funds are run to benefit members, not shareholders. Originally set up for specific industries (like construction or healthcare), most are now open to anyone. They tend to have lower fees and strong long-term returns.
• Retail Funds : Retail funds are offered by banks and financial institutions. They are run for profit and often have a wider range of investment options, but may carry higher fees.
• Public Sector Funds: These are funds set up for government employees at state and federal level. Many offer defined benefit structures (see below).
• Corporate Funds: Some large employers run their own super funds exclusively for their employees.
• Self-Managed Super Funds (SMSFs): An SMSF allows a small group of up to six people — usually family members — to manage their own superannuation. SMSFs are regulated by the Australian Taxation Office (ATO) rather than APRA. They make up 99% of the number of super funds in Australia and hold about 24% of all super assets. They require significant time, knowledge, and responsibility to run properly.
• Defined Benefit Funds: Some older, mostly public sector funds operate on a “defined benefit” model, where your retirement payout is calculated based on a formula (such as years of service and final salary) rather than the balance of your account. If you are in one of these funds, your retirement income is more predictable but you may have less flexibility.

What this means for you: If you earn $80,000 a year, your employer must now contribute at least $9,600 into your super account annually.

How Superannuation Works

The Super Guarantee

The foundation of super is the Super Guarantee (SG) — the minimum percentage of your ordinary time earnings that your employer must pay into your super fund. As of 1 July 2025, the SG rate reached its legislated ceiling of 12%, completing a phased increase that began at 3% in 1993.

Payday Super — A Major Change from 1 July 2026

One of the most significant reforms to super in over 30 years has now become law. From 1 July 2026, employers must pay super at the same time as your wages, rather than quarterly. Contributions must reach your super fund within 7 business days of your payday. This change is designed to reduce unpaid super and make sure workers’ money reaches their accounts promptly.

How Your Super Is Invested

Your super fund invests your money on your behalf across a range of assets — shares, property, bonds, and infrastructure. You generally choose an investment option (such as “balanced,” “growth,” or “conservative”) based on your risk tolerance and how far you are from retirement. Over time, investment returns compound, significantly growing your balance.

Tax Inside Super

Contributions and earnings inside super are taxed at concessional rates:

• Employer and salary sacrifice contributions are taxed at 15% (instead of your marginal income tax rate, which may be much higher).
• If you earn over $250,000 per year, you pay an additional 15% tax on concessional contributions (total 30%), known as Division 293 tax.
• Investment earnings inside super are taxed at a maximum of 15%.
• Withdrawals after age 60 are generally tax-free.

From 1 July 2026, an additional tax known as Division 296 applies to super balances above $3 million. Investment earnings linked to the portion of a balance above $3 million will be taxed at an extra 15% (bringing the total to 30% on that portion).

Where the Money Comes From

Your Employer’s Contributions

This is the main source for most Australians. Your employer pays 12% of your eligible earnings directly into your nominated super fund. You do not receive this money in your pay — it goes straight to your super.

Important: All employees are now covered, regardless of how much they earn. The previous $450 monthly minimum wage threshold was scrapped in 2022. Even casual and part-time workers receive super, with the only exception being employees under 18 who work fewer than 30 hours per week.

Government Contributions

The government also contributes to super in certain circumstances:

• Government co-contribution: If you are a low or middle-income earner and make personal (after-tax) contributions, the government may match a portion. For 2026–27, the maximum co-contribution is $500. The lower income threshold is $49,293 and the higher threshold is $64,293.
• Low Income Super Tax Offset (LISTO): Eligible low-income earners (currently those earning up to $37,000, rising to $45,000 from 1 July 2027) receive up to $500 refunded into their super to offset the 15% contributions tax — so they don’t pay more tax on super than they would on income.
• Super on Paid Parental Leave: From 1 July 2025, the government pays 12% super on top of government-funded Paid Parental Leave payments for eligible parents of babies born or adopted on or after that date. First payments into super accounts are expected from July 2026.

Your Own Voluntary Contributions

You can also add extra money to your super yourself:

• Concessional (before-tax) contributions include employer contributions, salary sacrifice, and personal deductible contributions. The annual cap is $30,000 for 2025–26, rising to $32,500 from 1 July 2026. If you haven’t used your full cap in past years and your total super balance is below $500,000, you may be able to “carry forward” unused amounts.
• Non-concessional (after-tax) contributions are made from your take-home pay. The cap for 2025–26 is $120,000. If your total super balance is above $2.1 million in 2026–27, your non-concessional cap is $0.

Contribution Caps at a Glance

Contribution Type	2025–26 Cap	2026–27 Cap
Concessional (before-tax)	$30,000	$32,500
Non-concessional (after-tax)	$120,000	$130,000
Transfer Balance Cap (retirement phase)	$2,000,000	$2,100,000

Exceeding these caps results in additional tax, so it is important to track your contributions each financial year.

How Superannuation Affects Your Government Payments

If you receive government payments — including the Age Pension — your superannuation can affect your eligibility and payment amounts. This is one of the most important areas to understand as you approach retirement.

The Age Pension and Super — How They Work Together

The Age Pension is a government payment for Australians aged 67 and over who meet income and assets tests. It serves as a safety net, and many Australians combine Age Pension payments with income from their super savings.

Currently, roughly 39% of Australians over 67 receive the full Age Pension, and a further 24% receive a part pension.

From 20 March 2026, the maximum full Age Pension rates are:

• Single: $1,200.90 per fortnight (including supplements)
• Couple (each): $829.40 per fortnight (plus supplements)

Rates are indexed twice yearly — in March and September — to keep pace with cost-of-living increases.

The Assets Test

Once you reach Age Pension age (67), your superannuation balance is counted as an asset. If you are under Age Pension age, Centrelink does not count your super balance in the assets test.

The assets test determines whether you receive the full pension, a part pension, or no pension. For homeowners who are single, the full pension assets threshold is $321,500. For every $1,000 in assets above the full pension threshold, your fortnightly pension reduces by $3.

Your home (your primary residence) is generally not counted under the assets test.

The Income Test and Deeming

Centrelink uses a system called deeming to calculate the income you are assumed to earn from your financial assets, including your super. As of 20 March 2026:

• Singles: The first $64,200 of financial assets is deemed to earn 1.25%, and anything above that is deemed to earn 3.25%.
• Couples (at least one receiving a pension): The first $106,200 of combined financial assets is deemed to earn 1.25%, and anything above that is deemed to earn 3.25%.

If you are under Age Pension age, your super balance in accumulation phase is not assessed under the income or assets tests. However, once you convert super to an account-based pension (income stream), it is counted regardless of your age.

Is Superannuation Pension Taxable?

Generally, superannuation withdrawals after age 60 — whether as a lump sum or as ongoing income stream payments — are tax-free. This applies to both the taxable and tax-free components of your super.

Below age 60, tax may apply depending on your age, the components of your super, and how you access it. The ATO website has full details on applicable rates.

Can You Have Super and Still Get the Age Pension?

Yes — many Australians receive both. Whether you receive a full, partial, or no Age Pension depends on your specific circumstances: your total assets, your income (including deemed income from super), and whether you own your home. Couples are assessed jointly for both tests.

Because everyone’s situation is different, it’s strongly recommended to speak with a financial adviser or Services Australia before making decisions about drawing down your super.

Getting Your Super Before You Retire

Super is designed to be preserved until retirement, but there are limited circumstances where you can access it earlier.

When Can You Normally Access Your Super?

• From age 60: If you have retired or left a job after turning 60.
• From age 65: You can access your super regardless of whether you are still working.
• Transition to Retirement: Once you reach your preservation age (now 60 for most people), you can open a Transition to Retirement Income Stream to access up to 10% of your super balance per year while still working.

Accessing Super Early — Special Circumstances

The ATO and your super fund allow early access in specific situations only:

Compassionate grounds — to help pay for:

• Medical treatment for you or a dependant
• Palliative care
• Modifications to a home or vehicle for severe disability needs
• Mortgage default preventing you from losing your home
• Funeral expenses for a dependant

Severe financial hardship — if you have been receiving eligible government income support payments continuously for at least 26 weeks and cannot meet basic living expenses. Your super fund — not Services Australia or the ATO — assesses these applications.

Terminal medical condition — if two medical practitioners certify you are likely to die within 24 months.

Permanent incapacity — if you are permanently unable to work in any job for which you are reasonably qualified.

First Home Super Saver Scheme (FHSS) — allows you to save for your first home inside super by making voluntary contributions, then withdraw those amounts (plus deemed earnings) to use as a deposit.

Temporary residents departing Australia — if you worked in Australia on a temporary visa and have now left permanently, you can claim your super as a Departing Australia Superannuation Payment (DASP).

Small balance — if your total super balance is less than $200 and you have stopped working for your employer, you may be able to withdraw it.

⚠️ Important: Accessing super early carries real long-term costs. Withdrawing $10,000 at age 35, for example, could cost you around $76,000 in retirement if your fund would have earned an average return of 7% per year over 30 years. Before applying for early release, consider free alternatives: the National Debt Helpline (1800 007 007) offers confidential advice, and Centrelink advance payments may also be available.

⚠️ Scam Warning: Beware of anyone who contacts you unsolicited offering to help you access your super early. Legitimate early access processes go through your myGov account (linked to the ATO) or directly through your super fund. Do not share your account details with third parties.

How to Find and Manage Your Super

• Check your super balance: Log in to myGov and link your ATO account. You can see all your super accounts, track contributions, and consolidate multiple accounts.
• Lost or unclaimed super: The ATO holds billions of dollars in lost super. Search for any lost accounts at ato.gov.au or through your myGov account.
• Consolidate accounts: Having multiple super accounts means paying multiple sets of fees. You can usually merge accounts online through myGov.
• Nominate a beneficiary: Make sure your super fund knows who should receive your super if you pass away. Super does not automatically form part of your estate — your fund trustee makes the decision unless you have a valid binding death benefit nomination.

Superannuation Calculators

Wondering how much super you will have at retirement — or how your super balance affects your Age Pension entitlement? Use these free, official tools:

• MoneySmart Super calculator: moneysmart.gov.au
• Services Australia payment estimates: servicesaustralia.gov.au
• ATO super contribution calculator: ato.gov.au

These can help you model different contribution levels, investment return scenarios, and retirement ages to plan ahead with confidence.

Key Superannuation Dates and Numbers (2026)

Item	Current Rate / Amount
Super Guarantee rate	12% (as of 1 July 2025)
Preservation age	60
Age Pension eligibility age	67
Concessional contributions cap (2025–26)	$30,000
Non-concessional contributions cap (2025–26)	$120,000
Transfer Balance Cap	$2,000,000 (2025–26)
Full Age Pension — single (from 20 March 2026)	$1,200.90 per fortnight
Full Age Pension — couple each (from 20 March 2026)	$829.40 per fortnight
Deeming rate (first threshold — single)	1.25% on first $64,200
Payday super commences	1 July 2026

Frequently Asked Questions

Do employees contribute to superannuation in Australia? Employer contributions are compulsory. Employees are not required to make additional contributions, but voluntary contributions are encouraged and can attract government co-contributions or tax benefits.

Is superannuation pension taxable? Super withdrawals after age 60 are generally tax-free. Below 60, the taxable component of lump sums or income stream payments may be taxed at concessional rates depending on your age.

Can I withdraw my superannuation in Australia? You can withdraw your super after you retire and reach your preservation age (60). You can also withdraw at any age if you meet certain conditions such as terminal illness, permanent incapacity, severe financial hardship, or compassionate grounds.

What is a superannuation fund? A superannuation fund is a regulated investment vehicle that holds and manages super money on behalf of members. It is overseen by trustees and regulated by APRA (for most funds) or the ATO (for self-managed funds).

How does superannuation affect the Age Pension? Your super balance is counted in both the assets test and income test (via deeming) once you reach Age Pension age. The higher your super balance, the more likely you are to receive a reduced pension — but many Australians receive a combination of both.