This study examines the macroeconomic and welfare effects of the reform to mandatory superannuation announced by the Australian government in 2010, which includes gradual increases in mandatory contributions and the effective removal of the contribution tax for low‐income workers. We find significantly larger superannuation assets and lower age pension expenditures. The reform has positive impacts on households’ long‐run welfare, with higher‐income households benefiting from the increased contributions and lower‐income households gaining from the contribution tax removal. The reform yields an aggregate efficiency gain of $11,753 per capita in initial resources for each future generation.