On July 1, 2022, Australia’s government implemented changes to the country’s superannuation program that increase the minimum employer contribution rate (also known as the Super Guarantee, or SG rate), eliminate the employee minimum earnings requirement to receive the SG, increase the withdrawal limit under the First Home Super Saver (FHSS) measure, and lower the eligibility age for Downsizer Contributions. The contribution rate increase was originally approved in 2012 with an effective date of July 1, 2015, but its implementation was delayed for 6 years. The other reforms are part of a bill passed on February 10, 2022, that aims to improve equity in the Australian pension system.

Key details of the recently implemented reforms include:

• Increasing the employer minimum contribution rate: The minimum employer contribution (or SG rate) increased from 10 percent to 10.5 percent of monthly payroll. The rate is set to rise another 0.5 percent next July and each July thereafter until it reaches 12 percent in July 2025.
• Eliminating the employee minimum earnings requirement: All employees are now eligible to receive the SG regardless of their monthly earnings. (As before, employees younger than age 18 must work at least 30 hours in a week to receive the SG.) The government estimates that around 300,000 employees (around 3 percent of the total labor force) were affected by the previous minimum earnings requirement (A$450 a month), and they generally were young, lower-income, part-time workers, with a majority (63 percent) being women.
• Increasing the maximum FHSS withdrawal limit: Under the FHSS, participants are allowed to withdraw a portion of their voluntary superannuation contributions to help cover the down payment on a first home. The new reform increases the maximum withdrawal amount from A$30,000 (US$20,332.21) to A$50,000 (US$33,887.01).
• Lowering the eligibility age for Downsizer Contributions: Under the Downsizer Contribution measure, older participants can contribute up to A$300,000 (US$203,322.06) of the proceeds from selling a home to their superannuation accounts. (For a couple, each qualifying member can contribute up to A$300,000.) The new reform lowers the eligibility age for Downsizer Contributions from 65 to 60.

Australia’s superannuation program is a mandatory occupational pension program covering employed persons; voluntary coverage is possible for self-employed persons. Although employees are not required to contribute, the government offers tax incentives and matching funds to encourage voluntary contributions. To receive old-age benefits, an individual must be aged 59 or older (rising to age 60 by July 2024) and permanently retired (or in an approved transition-to-retirement arrangement). Retirees with fewer financial resources may also be eligible for the means-tested noncontributory Age Pension and various supplemental benefits financed and administered by the Australian government.

Source: Social Security Administration