Superannuation (commonly called “super”) is Australia’s compulsory retirement savings system. It requires employers to contribute a percentage of an employee’s ordinary time earnings into a complying super fund. Over a lifetime of work, these contributions, combined with investment growth, build into a retirement nest egg. But super is more than a savings account – it’s a tax-effective structure designed to provide long-term financial security.

This 2025 guide explains exactly what superannuation is, why it exists, how it works, and what every Australian should know.

Table of Contents

  1. Why Superannuation Exists
  2. A Short History of Super in Australia
  3. How Superannuation Works
  4. Employer Superannuation Guarantee (SG)
  5. Types of Superannuation Funds
  6. How Superannuation Grows (Contributions + Investments)
  7. Tax Advantages of Super
  8. Preservation Age & When You Can Access Super
  9. The Future of Superannuation in Australia
  10. Related Superannuation Resources
  11. FAQs

1. Why Superannuation Exists

Australia introduced compulsory superannuation to reduce reliance on the Age Pension and to ensure Australians could fund their own retirement. Super provides:

  • Long-term financial security
  • Tax concessions that encourage saving
  • Universal coverage, since nearly all employees are included

2. A Short History of Super in Australia

  • 1980s – Super became more common through workplace agreements.
  • 1992 – The Superannuation Guarantee (SG) system began, with employer contributions of 3–4%.
  • 2002–2014 – SG gradually increased to 9.5%.
  • 2021–2025 – Staged increases from 10% to 12% (as of 1 July 2025).

Super is now a multi-trillion dollar system and one of the largest retirement savings pools in the world.

3. How Superannuation Works

When you work in Australia, your employer must pay 12% of your ordinary time earnings (OTE) into your nominated super fund. These contributions are invested by the fund in assets such as shares, property, bonds, and cash.

You can also make voluntary contributions, either pre-tax (concessional) or after-tax (non-concessional), subject to annual caps.

4. Employer Superannuation Guarantee (SG)

From 1 July 2025, the SG rate is 12%. Employers must pay contributions by quarterly deadlines:

  • 28 October
  • 28 January
  • 28 April
  • 28 July

For full details, see our Superannuation Rates & Dates 2025 Guide.

5. Types of Superannuation Funds

Australians can hold super in different types of funds:

  • Industry funds – Not-for-profit, low fees, strong default options
  • Retail funds – Run by banks/financial institutions, wide investment choice
  • Public sector funds – For government employees, some defined benefit options
  • Corporate funds – Employer-based funds
  • SMSFs (Self-Managed Super Funds) – For higher balances, full control, more responsibility

For detailed comparisons, visit our Superannuation Comparison Guide.

6. How Superannuation Grows (Contributions + Investments)

Super grows through:

  • Employer contributions (SG)
  • Voluntary contributions (salary sacrifice or personal)
  • Government co-contributions (if eligible)
  • Investment returns (shares, property, fixed interest, cash)

Use our Superannuation Calculators & Tools to project your retirement balance.

7. Tax Advantages of Super

Superannuation is a tax-effective environment:

  • Concessional contributions taxed at 15% (lower than most personal tax rates)
  • Earnings in accumulation phase taxed at 15%
  • Earnings in retirement phase generally tax-free (subject to transfer balance cap)
  • Withdrawals after age 60 usually tax-free

For details, see Superannuation Contributions & Tax Rules.

8. Preservation Age & When You Can Access Super

You generally cannot access super until you reach preservation age and retire. Preservation age depends on your date of birth:

  • Before 1 July 1960 → 55
  • 1 July 1960 – 30 June 1961 → 56
  • 1 July 1961 – 30 June 1962 → 57
  • 1 July 1962 – 30 June 1963 → 58
  • 1 July 1963 – 30 June 1964 → 59
  • After 1 July 1964 → 60

At age 65, you can access super regardless of work status. For details, see Superannuation Withdrawals & Retirement Rules.

9. The Future of Superannuation in Australia

Super is continuously evolving:

  • SG now 12% from 1 July 2025
  • Payday Super (from July 2026) will require SG to be paid at the same time as wages
  • Ongoing debates around taxation of high balances

Staying up to date ensures you maximise benefits and avoid compliance issues.

10. Related Superannuation Resources

11. FAQs

What is superannuation in Australia?
A compulsory retirement savings system where employers contribute 12% of earnings into a super fund.

When did superannuation start in Australia?
Compulsory SG contributions began in 1992 at 3–4%.

When can I access my super?
From preservation age if retired, or at 65 automatically.

Is super taxed?
Yes, but at concessional rates: 15% in accumulation, generally tax-free in retirement.

What is the best type of super fund?
It depends—industry funds suit many, SMSFs suit high balances, retail funds offer more choice.

Final Word

Superannuation is the foundation of retirement planning in Australia. It combines compulsory contributions, tax concessions, and investment growth to create financial security. Understanding how super works is the first step to making informed decisions about contributions, fund choice, and withdrawals.

📌 Next: Learn about contribution caps and salary sacrifice strategies in our Superannuation Contributions & Tax Rules Guide.