What is superannuation?
Answer
Compulsory retirement savings contributed by employers
Explanation
Superannuation, often shortened to super, is the compulsory retirement savings system that requires employers to contribute a percentage of an employee's wages to a superannuation fund chosen by the employee. The system was introduced by the Hawke Labor government's Superannuation Guarantee (Administration) Act 1992 and now covers nearly all working Australians.
The Superannuation Guarantee rate is 12 per cent of ordinary time earnings as of 1 July 2025, having risen gradually from 9 per cent in 2002. Employers must pay this amount on top of the employee's wage into the employee's nominated super fund at least four times a year. Employees can also make additional voluntary contributions on a pre-tax (salary sacrifice) or post-tax basis, subject to annual concessional and non-concessional contribution caps set by the Australian Taxation Office.
Australian superannuation is one of the largest retirement savings pools in the world, with total assets of about 3.7 trillion dollars across about 23 million member accounts as of 2024. The system is supervised by the Australian Prudential Regulation Authority for fund solvency and by the Australian Securities and Investments Commission for disclosure and conduct. Funds are typically structured as either industry funds (such as AustralianSuper, Hostplus, and Cbus, originally established by industry and union sponsors) or retail funds (operated by banks and financial services firms).
Super can usually be accessed only at retirement, currently from age 60 once a person has retired or aged 65 regardless of working status. Earlier access is permitted in cases of severe financial hardship, compassionate grounds (such as funeral expenses or medical treatment), terminal illness, total and permanent disability, and the First Home Super Saver Scheme. Superannuation enters its retirement phase via account-based pensions, transition-to-retirement income streams, or lump-sum withdrawals, all subject to specific tax rules administered by the Australian Taxation Office.
Why this matters for your test
Superannuation is a substantial part of every Australian worker's total compensation and retirement plan, and knowing the 12 per cent guarantee rate and the chosen-fund principle is essential to managing a working career.
Source: Australian Citizenship: Our Common Bond (2024)
