Millions of workers across Australia are set to see a lift in their retirement savings, as compulsory superannuation contributions increase from 11.5% to 12% from 1 July. The change, the final stage of a long-planned legislative reform, will raise the lifetime savings potential for many Australians, particularly younger workers.
As retirement planning becomes more prominent in national financial debates, the rise in the super guarantee marks a critical milestone in the evolution of Australia’s retirement income system. Backed by new research, the policy aims to help address historical gaps in retirement wealth, particularly among lower-income earners and women.
Higher Contribution Rate Aims to Strengthen Retirement Outcomes
From the start of the new financial year, employers will be legally obliged to increase their superannuation contributions from 11.5% to 12% of an employee’s ordinary earnings. This change, enshrined in legislation, concludes a decade-long phase-in process designed to strengthen the retirement system without abrupt cost shocks to businesses.
According to the Association of Superannuation Funds of Australia (ASFA), the revised contribution rate could help a 30-year-old earning the median wage of $75,000 and with a current balance of $30,000 amass around $610,000 in retirement savings—expressed in today’s dollars.
This contrasts sharply with current figures, which show the median balance for men aged 60 to 64 stands at $205,000, and just $154,000 for women of the same age group.
ASFA research suggests that younger Australians overwhelmingly support these increases. In a recent survey, 77% of respondents aged 18 to 34 said the contribution rate should be no lower than 12%, while 82% agreed that regular super contributions gave them greater confidence in their financial future.
Additional Policy Changes Extend Superannuation Access
The increase in the super guarantee is one of several changes to the system taking effect from 1 July. In a bid to expand inclusivity, the Australian government will begin paying superannuation on Parental Leave Pay, applying the 12% rate to eligible government support payments.
This marks the first time such leave has attracted super contributions and is expected to improve outcomes for parents—particularly mothers—who often face savings shortfalls due to career interruptions.
In parallel, the transfer balance cap, which sets the maximum amount a person can move into the tax-free retirement phase, will rise from $1.9 million to $2 million. Additionally, individuals with super balances above $3 million will face a higher tax rate—30% instead of the standard 15%—on earnings above this threshold, though this measure remains pending legislation.
While these changes collectively represent meaningful reforms to the super system, ASFA noted that achieving retirement adequacy will also depend on broader employment conditions, such as access to secure work and time spent out of the labour force.
