What you need to know about superannuation
Superannuation is designed to set you up for a comfortable retirement. With Australians now living and working longer than ever, superannuation has become even more important.
Many people assume that since superannuation contributions happen automatically, they don’t need to do anything. However, taking an active part in your super accrual will help you save much more in the long run. Here’s what you should know.
What is superannuation?
Superannuation is a compulsory savings system for your retirement. It’s designed so that Australian workers have an income after they retire, to either supplement or replace the government aged pension. Superannuation is paid by your employers, who pay contributions for all employees, including part-time and casual workers – and even some contractors. Employees can also make voluntary contributions to their super fund.
Compulsory superannuation has been in place for more than 30 years. While it initially started out as a program for government employees, there was a big push to make it available for all workers, not just those in higher-paying or management jobs, says Lynda Cross, Head of Guidance at Aware Super. It was eventually mandated by the Australian government in 1992.
How does the superannuation system work?
Since superannuation is mandatory, it’s usually a standard part of the payroll process. Employers must pay a minimum contribution (some choose to pay more) into an employee’s nominated fund. If you don’t choose which fund, the payment will go to a default fund nominated by your employer. Generally, you can only access super once you reach retirement age.
Currently, the superannuation guarantee rate is 12% of ordinary time earnings. This usually includes your base wage, allowances, paid leave, commissions and bonuses, but not overtime or expense reimbursements.
Right now, employers must pay their super contributions at least every three months. However, from 1 July 2026 employers will need to pay super contributions into your nominated fund at the same time as they pay your salary or wages – what’s known as Payday Super.
Employees can also choose to make voluntary contributions to their super. “The benefit of this is that it’s taxed at a much lower rate than if it were paid directly to you,” says Cross. “The other benefit is that the more that goes in, the more you’re going to have at the end and the more benefit you get from compounding returns across your lifetime.”
Another recent change is that superannuation is now paid on government paid parental leave. This is separate from parental leave pay provided by your workplace and is designed to help close the gender super gap, says Cross.
“We did some modelling around what that would do for a low-income woman with two kids. They could be up to $13,800 better off at retirement as a result of those payments during parental leave,” she says.
Superannuation mistakes to avoid
Although superannuation is paid automatically, that doesn’t mean you should ‘set it and forget it’. The biggest mistake Cross sees is not taking an active interest in your super. Many people put it off until later, not realising that small changes add up to thousands with compound interest.
- Some of the most common mistakes to watch out for include:
Having multiple super funds. If you don’t provide the details for your chosen super fund when joining a business, they’ll pay into their default fund. This means you can end up with multiple funds and paying fees for all of them, eating into your returns. Log onto MyGov to check if this is the case – sorting it out is as simple as contacting your chosen fund who can manage the consolidation. - Thinking employer contributions are enough. Making voluntary super contributions adds up in the long run. Many people put this off while they’re young which often leads to playing catch-up later, says Cross. She encourages people to start early, even if it's just a really small amount each month, to get the compounding growth over time.
- Sticking to the default options. Super funds have a broad range of options, from investment risk and type to insurance coverage. The younger you are, the more time you have to ride out the ups and downs of higher- risk investments in exchange for higher long-term returns, says Cross. Make sure you select the option that lines up with your life stage, what you want to achieve, and your risk tolerance.
- Not paying yourself super (if you’re self-employed). People who are self-employed or sole traders don’t have to pay themselves super, but that can leave you worse off when it’s time to retire. It’s still important to make contributions, says Cross, as there’s no guarantee your business will be enough to fund your retirement.
- Assuming you’ll retire at 65. A lot of people end up retiring earlier than they planned, says Cross. Start thinking about your retirement balance and how much income it will provide well before your retirement date. Make sure you have the right insurance in place too, in case you need to stop work early.
What to do if something isn't right
If you notice something is off, for instance if employer contributions are missing, it’s best to act right away. “I'd say always contact your fund first, because they can help you work out if something does look wrong,” says Cross. “They can guide you on what the next steps might be. You might also ask your employer.”
In some cases, you might need to escalate issues. The right to superannuation has now been enshrined in the National Employment Standards of the Fair Work Act, says Sam Nottle, Principal Lawyer at Jewell Hancock Employment Lawyers.
This means it’s now easier to recover unpaid superannuation than it was in the past. It effectively allows all Australian employees covered by the Fair Work Act to act on it. In the past, this was more complex for individuals to recover, says Nottle.
Successful claims can seek to recover not just the unpaid amounts but also interest and penalties for breach of the Fair Work Act. There is, however, a six-year limitation on making claims under this, which is why it’s best to address issues sooner rather than later.
Where to go for more information
For more information on your superannuation rights, visit MoneySmart or the ATO website for calculators and guidance. Speak to your super fund or potentially seek legal advice for more specific advice relating to your circumstances.