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Super contributions hit record levels

By Keith Ford
3 minute read

The 2021–22 financial year saw super contributions increase to their highest levels, hitting a record $163 billion.

According to research from Rainmaker Information, contributions for the 2021–22 financial year rose 13 per cent, the third highest increase since the global financial crisis.

“The driving force behind this renaissance in contributions was a 9 per cent increase in employer contributions and a staggering 23 per cent increase in member contributions,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

Employers paid two-thirds of total contributions, while superannuation guarantee (SG) contributions made up almost 60 per cent.

Rainmaker said that while most people only pay the compulsory 10 per cent rate, the average among all Australians is a contribution of 17.4 per cent of their total wages and salaries.

The firm said that this raises equity issues around the level of superannuation taxation concessions for people on high incomes.

The federal government recently announced it would address this issue by increasing the tax rate for super balances in excess of $3 million from 15 per cent to 30 per cent.

“The modest adjustment we announce today means 99.5 per cent of Australians with superannuation accounts will continue to receive the same generous tax breaks, and the 0.5 per cent of people with balances above $3 million will receive less generous tax breaks,” Treasurer Jim Chalmers said.

“From 2025–26, the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent.”

The contribution ratio is up from 15.8 per cent in 2018, but lower than the 20.8 per cent ratio in 2017 prior to the introduction of the Transfer Balance Cap (TBC), which limited tax-free retirement savings to $1.6 million.

Rainmaker estimated that had the TBCs not been introduced, total superannuation contributions would be equivalent to 23 per cent of all wages by 2022. This would equate to $212 billion, or 30 per cent more than the actual amount in 2021–22.

“Contributions into superannuation were so strong through the past decade that each year they exceeded the amount paid as benefits by an average of 30 per cent,” said Mr Dunnin.

“However, the contributions above SG rate has fallen one-third since 2009 to be 7 per cent by 2022.”

The firm added that while the share of total superannuation benefit payments paid as lump sums had been consistently reducing up until 10 years ago, this has reversed course.

In 2015–16, the share of benefits paid as pensions peaked at 62 per cent, but by 2020–21, it fell to 44 per cent before rebounding to 50 per cent in 2021–22.

“Another major strategic shift is that the increasing rate of SG contributions, on its way to 12 per cent, has been accompanied by the squeezing down of the rate of voluntary member contributions,” Mr Dunnin added.