If you are working in Australia as an employee, you would receive superannuation payments as part of your remuneration deal. So, in a nutshell, what is superannuation?
It’s your money – for your future. The Australian government understood how hard it was to get people to save on their own, so they legislated forced savings.
The hitch is that you can’t access it until you retire. And there are lots of complex rules that can and do change.
Here are some basics to get you started, and understanding these is the first step to getting control over your super.
Superannuation is a way of saving for your retirement
Both you and your employer can make contributions that accumulate over time and this money is then invested in shares, government bonds, property, or other appropriate investments.
Your employer pays 9% now, but will be required to pay 12% in July 2019
The Superannuation Guarantee, or the amount your employer pays, came into operation on 1 July 1992. Back then, employers became obliged to contribute 3% of your salary – excluding overtime, leave loading and fringe benefits – into your superannuation fund. This has steadily risen to the current 9%, and will increase again to 9.25% on 1 July 2013, then will eventually be 12% from July 2019.
Are any employees left out?
Yes, there are exceptions to paying the Superannuation Guarantee. Employers are not obliged to pay for:
- employees earning less than $450 per month
- employees under age 18 who work 30 hours per week or less
- employees aged 70 years or older
- anyone paid to do domestic or private work for 30 hours per week or less.
Gain tax advantages by paying extra
There are limits that affect how much you can contribute to superannuation, and these can also change.
For 2013/14, everyone has a tax-advantaged concessional contributions cap of $25,000 that can be paid into super as employer contributions or personal contributions. Additionally, up to $150,000 can be paid into super without receiving tax concessions.
If you have money left over after your weekly expenses, and you want to save for the future, you may want to consider making superannuation contributions rather than other forms of investment.
I want to take out my superannuation
Generally, you can withdraw your superannuation only in these circumstances:
- you retire and reach preservation age (between the age of 60 or 55 depending on your date of birth)
- you have turned 65
- you qualify under the “transition to retirement” rules
- you suffer from a total and permanent disability
- you have a terminal illness and are under the age of 60
- you die, or
- you can show that there is severe financial hardship, or
- other compassionate grounds.
Can I get access to it all at once after I retire?
There are a few ways to get access to your money after your retire:
- If you withdraw money from your superannuation you can choose to receive this by lump sum or in the form of regular payments, like a pension.
- If the benefit is paid as a pension, your accumulated contributions are left in the fund, which uses it for reinvestment and the fund pays you regular pension-like payments.
- It’s also possible to take the lump sum and reinvest it somewhere else. If you do this, you can also be paid regular payments – this is often called an annuity.
- You can get an allocated pension, which is a pension that allows you to withdraw capital lump sums at any time.
- Another option is the transition-to-retirement scheme. This allows you to keep working after your preservation age and still access some of your superannuation. Make sure you get financial advice if you are contemplating this.
Want to find out more?
There is much, much more to superannuation, and the rules do change. We will take a closer look at aspects of superannuation in future posts, but you can also find out more at www.ato.gov.au. Or speak to a financial adviser about your personal circumstances.
Moneylogue 