When should I rollover my super balance?

When should I rollover my super balance?

For many Aussies, the super system is a complex, difficult-to-navigate maze. They either choose or are allocated a super fund when they first start working and, each time they change jobs, they may get allocated a new super fund account.

As a result, many Aussies have accumulated multiple super accounts, which means they need to pay fees several times. One way of avoiding this scenario is to take that original super fund with you to your next job. Still, you may find a better performing fund or one with fewer fees.

Suppose you choose to open a new account. In that case, you can rollover your super balance and consolidate it into one super fund if both super funds allow rollovers. If you’re receiving super contributions from your employer, you may need to inform them to make contributions to the new super fund.

You may also need to rollover your super balance if you’re a member of a super fund meant for employees of a particular industry or corporation and are changing jobs. You could then choose to rollover your super benefits into the fund allocated by your new employer. Alternatively, you could move your super to an eligible rollover super fund. You should consider checking with your super fund provider if you need to pay any fees or taxes for the rollover. Also, find out if the new super fund offers similar or better benefits than your present super fund, including insurance.

When do I have to pay a superannuation rollover tax?

Typically, you don’t need to pay taxes on rolled-over super benefits or report a rollover of super benefits on your tax return. However, some of your super benefits like interest may be untaxed. When you request a rollover, your super fund provider may withhold tax on this untaxed part, but this should be reflected in your super benefits statement.

Furthermore, when you receive such untaxed super benefits in a new super fund, they are considered personal super contributions. You can usually make personal contributions of up to $100,000 if your super balance was less than $1.6 million at the end of the previous year. If the untaxed super benefits you receive exceed the $100,000 cap, you may have to pay tax at a non-concessional rate.

Your super fund provider may also withhold tax before rolling over your benefits under other circumstances. This includes if they find that the untaxed part of your super balance exceeds the untaxed plan cap amount. For the 2020–21 financial year, this cap is $1.565 million, while in 2019–20 it was $1.515 million. The tax withholding could also include a Medicare levy and a temporary budget repair levy. Given these somewhat complicated tax implications, you should consider consulting with your financial adviser before you initiate a super benefit rollover.

How do I rollover my super benefits?

Once you’re sure that you can rollover your super benefits from one fund to another you have multiple options to action the request. You can place a super rollover initiation request by logging into your myGov account or completing and filing a paper form. If you’re rolling over your super benefits to a self-managed super fund, you’ll have to complete a different form.

Initiating the request via your myGov account can simplify the process as you won’t need to submit your identity documents. You should remember that your entire super balance will be rolled over to the new super fund account. If you’re considering a partial rollover, you should check if your super fund provider allows such a rollover. Also, remember that you can’t withdraw any part of your super balance.

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Learn more about superannuation

How do you set up superannuation?

Before you set up a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

How do I combine several superannuation accounts into one account?

The process used to consolidate several superannuation accounts into one is the same process used to change superannuation funds. This can be done through your MyGov account or by filling out a rollover form and sending it to your chosen fund.

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

When did superannuation start?

Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.

Is superannuation paid on unused annual leave?

If your employment is terminated, superannuation will not be paid on unused annual leave.

What are my superannuation obligations if I'm an employer?

Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

What are ethical investment superannuation funds?

Ethical investment funds limit themselves to making ‘ethical’ investments (which each fund defines according to its own principles). For example, ethical funds might avoid investing in companies or industries that are linked to human suffering or environmental damage.

How is superannuation regulated?

The Australian Prudential Regulation Authority (APRA) regulates ordinary superannuation accounts. Self-managed superannuation funds (SMSFs) are regulated by the Australian Taxation Office.

What are concessional contributions?

Concessional contributions are pre-tax payments into your superannuation account. The payments made by your employer are concessional payments. You can also make concessional contributions with a salary sacrifice.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

Can I choose a superannuation fund or does my employer choose one for me?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

Is superannuation taxed?

Superannuation is taxed. It is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

How much superannuation do I need?

According to the Association of Superannuation Funds of Australia (ASFA), here is how much you would be able to spend per week during retirement:

Lifestyle Singles Couples
Modest $465 $668
Comfortable $837 $1,150

Here is the superannuation balance you would need to fund that level of spending:

Lifestyle Singles Couples
Modest $50,000 $35,000
Comfortable $545,000 $640,000

These figures come from the March 2017 edition of the ASFA Retirement Standard.

The reason people on modest lifestyles need so much less money is because they qualify for a far bigger age pension.

Here is how ASFA defines retirement lifestyles:

Category Comfortable Modest Age pension
Holidays One annual holiday in Australia One or two short breaks in Australia near where you live Shorter breaks or day trips in your own city
Eating out Regularly eat out at restaurants. Good range and quality of food Infrequently eat out at restaurants. Cheaper and less food Only club special meals or inexpensive takeaway
Car Owning a reasonable car Owning an older, less reliable car No car – or, if you do, a struggle to afford the upkeep
Alcohol Bottled wine Casked wine Homebrew beer or no alcohol
Clothing Good clothes Reasonable clothes Basic clothes
Hair Regular haircuts at a good hairdresser Regular haircuts at a basic salon Less frequent haircuts or getting a friend to do it
Leisure A range of regular leisure activities One paid leisure activity, infrequently Free or low-cost leisure activities
Electronics A range of electronic equipment Not much scope to run an air conditioner Less heating in winter
Maintenance Replace kitchen and bathroom over 20 years No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom No budget to fix home problems like a leaky roof
Insurance Private health insurance Private health insurance No private health insurance

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.