Age 2005-06 Income SG Superannuation Saving Only SG Superannuation Saving plus 3% additional saving within superannuation SG Superannuation Saving plus 3% additional saving outside superannuation


$20,000 114% 132% 123%
$40,000 72% 82% 78%
$60,000 58% 65% 63%
$80,000 51% 58% 56%
$100,000 47% 54% 51%
$150,000 38% 46% 42%


$20,000 108% 119% 114%
$40,000 70% 76% 74%
$60,000 55% 59% 58%
$80,000 48% 52% 51%
$100,000 44% 47% 47%
$150,000 35% 39% 38%

These replacement rate calculations have been based on the comparison of average real annual net retirement expenditure with the net expenditure in the final year of working life. This has historically been the preferred methodology of the Treasury. A comparison of the first 10 years of net expenditure during retirement to the last 10 years of net expenditure during working life was recommended by the authors in 2004 as the most robust when analysing a person who has worked part-time before retirement or has taken benefits as a lump sum. However, where a person is assumed to work on a full-time basis until the point of retirement and then takes a superannuation benefit as a complying pension, the results under both replacement rate formulas are very similar (see Rothman and Bingham, 2004).


The Government introduced the superannuation contributions and termination payment surcharge in the 1996-97 Budget.

The superannuation contributions surcharge has been applied to surchargeable contributions (largely, deductible contributions to superannuation funds). The termination payments surcharge was introduced at the same time as the superannuation contributions surcharge to ensure that termination payments were not used as a means of avoiding the superannuation surcharge. The termination payments surcharge has been applied to employer termination payments that are retained as cash (that is, not rolled over into a superannuation fund).

The surcharge was not payable until an individual's adjusted taxable income exceeded the lower surcharge threshold. Prior to 1999-2000 the adjusted taxable income comprised of taxable income and surchargeable contributions. The maximum rate of the surcharge phased in between the surcharge thresholds of $70,000 and $85,000 (for the 1996-97 income year). Both thresholds have been indexed annually for movements in Average Weekly Ordinary Time Earnings. From 1999-2000 the grossed up taxable value of an employee’s reportable fringe benefits were added to taxable income and surchargeable contributions to determine an individual’s adjusted taxable income for surcharge purposes.

In the 2001-2002 Budget, the Government announced a number of enhancements to the surcharge arrangements. These included a change to the method used to determine a taxpayer’s adjusted taxable income under the surcharge legislation. This meant that taxpayers who received modest termination payments and who otherwise do not have high incomes would have a reduced or no surcharge liability.

In the 2002-03 Budget, the Government announced that it would reduce the maximum surcharge rates to 10.5 per cent over three years commencing from 1 July 2002. However, in negotiations to secure passage of the relevant legislation through the Senate, the Government could only obtain agreement to reduce the maximum surcharge rates to 14.5 per cent in 2003-04, 13.5 per cent in 2004-05 and 12.5 per cent in 2005-06 and succeeding years.

As part of the initiatives announced in the 2004-05 Budget to provide increased incentives for superannuation savings, the Government proposed to further reduce the maximum surcharge rates to 7.5 per cent from 1 July 2006. However, the Government could only obtain support in the Senate to reduce the rates to 12.5 per cent in 2004-05 and 10.0 per cent in 2005-06 and succeeding years.

In the 2005-06 Budget the Government announced that it will abolish the surcharge on superannuation contributions and relevant termination payments made or received in the 2005-06 and later financial years.

The abolition of the surcharge will boost the superannuation savings of affected individuals, provide incentives for individuals to make additional voluntary superannuation savings and simplify the operation of the superannuation system.


The Government’s expanded co-contribution policy offers a 1.5 for 1 co-contribution payment (maximum of $1,500) to those who make post-tax personal contributions to superannuation and:

  • are aged 70 or under at the end of the income year in which their personal contributions are made;
  • receive at least 10 per cent of their income for co-contribution purposes as eligible employment income; and
  • have an income for co-contribution purposes of under $58,000 (income for co-contribution purposes is the total of assessable income plus reportable fringe benefits).

It is important to note that a member contribution of $1,000 is not required to receive a co-contribution. As an example, any eligible person with an income for co-contribution purposes of less than $52,000 can receive a co-contribution payment of $300 by making post-tax contributions of $200 in that year. Table C.1 below outlines the maximum co-contribution benefit available to eligible members with various incomes for co-contribution purposes, as well as the level of post-tax personal contributions required to receive this maximum benefit.

Table C.1: Maximum benefit available under the co-contribution for eligible members

Income for co-contribution purposes Maximum co-contribution benefit available Post-tax personal contribution required to receive maximum
up to $28,000 $1,500 $1,000
$31,000 $1,350 $900
$34,000 $1,200 $800
$37,000 $1,050 $700
$40,000 $900 $600
$43,000 $750 $500
$46,000 $600 $400
$49,000 $450 $300
$52,000 $300 $200
$55,000 $150 $100
$58,000 and above $0 $0