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‘Substantial difference': How superannuation change will actually impact Australians
Australians are just weeks away from receiving a welcome boost to their retirement savings, with the change having a more significant impact than some people may think.
From July 1, when changes to the Superannuation Guarantee kick in, employers will be required to pay super contributions of 12 per cent of a worker's ordinary time earnings.
This is up from the 11.5 per cent minimum contribution currently required by law.
While a 0.5 per cent increase may not sound like a lot, financial adviser Nicole Gardner said it will have a much more significant impact than many Aussies might think.
'It depends how old the person is, for someone who's young and in their 20s, the compounding effect of that extra 0.5 per cent over the next 40 years is huge,' she told
Ms Gardner, who founded Stellar Wealth, broke down the real impact this change will have on Australian workers in a recent social media video.
She explained that a person earning $60,000 a year is currently being paid $6900 a year in superannuation and, under the change, this will increase to $7200.
According to the Australian Bureau of Statistics, the current average full-time Australian worker earns just over $100,000 a year.
Anyone on this salary will see their yearly super contributions rise to $12,000, up from $11,500.
Those earning $150,000 will see a rise to $18,000, up from $17,250 and anyone earning $200,000 a year will see $24,000 go towards their super, up from $23,000.
This is the final planned increase to the superannuation guarantee, with the figure having increased by 0.5 per cent over the past few years in order to reach the 12 per cent figure.
This is the number that it was generally accepted by the government that contributions would need to reach in order to meet the basic needs of Australian retirees in the future.
The reason for the stepped yearly increases has been to give businesses enough time to financially plan for the change.
While Ms Gardner believes the change is, overall, really positive for Australians and the future of retirement in this country, there are some potential downsides that people need to be aware of.
One relates to workers who are on a salary package that includes their super.
'Only a small amount of people have that arrangement with their employer, and that can actually mean that you will have a reduction in your pay to compensate, because the package is at a fixed amount,' the financial adviser said.
Ms Gardner also issued a warning to people who salary sacrifice into their super, warning the change could potentially push them over the $30,000 concessional contributions cap.
This is the maximum amount of before-tax contributions you can make towards your super each year without those funds being subject to extra tax.
'If you are salary sacrificing up to the cap, with the additional amount of super, that could put you over the cap, so you just need to check the numbers there,' she said.
There are currently more than 24 million superannuation accounts in Australia with assesses equalling $4.2 trillion.
According to the ATO, as of the 2021 financial year, the average super fund balance for women between the ages of 65-69 was $403,038, and $453,075 for men.
Given the Association of Superannuation Funds of Australia puts the comfortable retirement standard at $595,000 for a 67-year-old person, further showing the importance of the July 1 super guarantee increase.
According to research from financial comparison site, Finder, 3 in 5 Australians say they are not sure whether they will have enough super to get by in retirement, or feel they will definitely not have enough. This is up from 50 per cent of respondents in 2023.
Pascale Helyar-Moray, superannuation expert at Finder, said the increase to 12 per cent will make a 'substantial difference' to the final super balance of a young person starting their career today.
Even if they don't make additional contributions, the power of compounding interest over decades will have a huge impact.
'For those who can, contributing extra to your super by salary sacrificing is a smart move,' Ms Helyar-Moray said.
'Just remember, once money goes into super, you can't touch it until retirement, so start small if you need to. Even adding $100 a month will make a significant difference thanks to the power of compounding interest.
'It's also important to check that your employer is paying your superannuation guarantee contributions on time.'
