Posted March 20 2025
By Alasdair Spinner
If you are new to exploring opportunities in Australia and want to understand how the pension scheme works, here’s a brief primer - especially as an important change is coming up in July 2025.
In Australia, superannuation (super) is the primary method of saving for retirement.
By law, your employer must make super contributions into a super fund of your choice. These funds are investment-based, and you can switch funds whenever you wish if your goals change or if you want to divest from specific sectors. When you join a health service, they will have a default fund for you to start with. These tend to be well-managed and allow you to customize your investment profile. Additionally, as large employers, health services often negotiate extra benefits for employees with the investment fund.
You can also make additional voluntary contributions to your fund. Many doctors choose to contribute extra via salary sacrifice/packaging schemes due to the associated tax benefits. Currently, extra contributions are capped at AUD 30,000.
So what's changing in July 2025? In July, the minimum super contribution that employers must make will increase to 12% (from 11.5%). This means that if you are employed by a hospital or health service, your employer must contribute 12% of your income into a super fund.
When I left Australia in 2015, super was at 9%. The 2025 increase marks the final step in the phased superannuation rises legislated by the Kevin Rudd/Julia Gillard Labor administration.
Super is subject to a concessional income tax rate of 15%, meaning the tax on earnings directed into your super fund is significantly lower than the standard income tax rate on money deposited directly into your bank account.
Since July 2023, individuals can access some of their super at age 60. Upon reaching 65 (or retiring after 60), you gain full access to your super funds. If you withdraw it after you are 60, it is not taxed.
In my opinion, super really is an excellent benefit. While it may not seem immediately attractive since you don’t receive the cash directly, it is a long-term financial advantage and is the gift which keeps on giving. For low-income earners, it provides security and dignity in retirement. For higher earners, such as medical specialists, it obviously does the same but it also maximizes income towards retirement while playing a part in a diversified investment portfolios.