Australia: Pension Update

On March 29, a law was passed that makes changes to the country's mandatory occupational pension (superannuation) system to help raise the level of retirement savings. The new law gradually increases the employer's contribution rate, removes the age limit for making contributions, and introduces a new tax rebate for low-income earners. Those measures are part of the government's "Stronger, Fairer, Simpler" tax reform plan announced in 2010. Beginning July 1, 2013, the following will go into effect:

• The mandatory employer contribution rate will gradually increase from 9 percent to 12 percent of payroll by 0.25 percent per year from 2013 to 2015 and by 0.50 percent per year from 2015 to 2019. (Employee contributions remain voluntary.) The government estimates that some 8.4 million employees will benefit from this measure.
• The age limit for making contributions (either employer or employee) to a superannuation account will be abolished. The current limit is age 70.

In addition, effective July 1, 2012, workers with annual income of up to A$37,000 (US$38,271) will become eligible for a government tax rebate of up to A$500 (US$517) a year that will be deposited in their superannuation accounts. No worker contribution is required. According to the Australian Tax Office, 57 percent of all individual taxpayers earn less than A$40,000 (US$41,374) per year. This measure will supplement the existing government matching contribution (called co-contribution) of up to A$1,000 (US$1,034) for workers who earn up to A$61,920 (US$64,046) a year and make voluntary contributions to a superannuation account.  Source: US Social Security Administration