Superannuation is a payment made at least once per quarter into a fund that can be accessed once you have retired. Superannuation can generally be relied upon as a nest egg for retirees—the earlier you start earning a wage, the more your employers will have contributed to your super fund over your lifetime, meaning the more you will be able to spend in your retirement.
Under Australian law, all employees of companies and organisations much be paid a superannuation contribution, currently at the minimum rate of 9.5 per cent of your total income. This is known as the ‘super guarantee’.
Casual employment and superannuation
Though casual employees might not be entitled to some benefits permanent employees are granted, they must be paid superannuation. ASIC states that “Your employer must pay 9.5 per cent of the value of your 'ordinary time earnings' into your super fund if:
- You're over 18 and earn more than $450 before tax in a calendar month
- You're under 18 and work more than 30 hours a week (and still earn more than $450 in the calendar month)”
Furthermore, if you’re a casual employee who works extra hours once in a while, your employer must adjust their superannuation payment accordingly. How often your superannuation is paid will depend on your company, but it should be done at least quarterly. If you would like to boost your superannuation, consider making voluntary contributions. Those who are on lower incomes might qualify for the government’s co-contribution scheme.
Choosing your super fund
Many employers have a default superannuation fund, but you can generally opt for your employer to pay your superannuation into a fund of your choice. Conducting thorough research before choosing your super fund can be advantageous, as you will rely heavily on your super fund during your retirement.
There are several types of super funds you could choose from, including:
- Industry funds are super funds which were originally established for the purpose of catering to employees in various industries, but are now usually open to everybody
- Retail funds are managed by banks or insurance companies
- Corporate funds are generally managed by employers or companies
Alternatively, you might choose a self-managed superannuation fund (SMSF). In order to do this, you must register the fund with the ATO. During this process, you will also be able to elect for your fund to be regulated, apply for a tax file number and Australian Business Number, and register for GST as well.
Once you choose your super fund, your employer might ask you to fill out the ATO’s standard choice form, in order for them to organise your super payments.
Things to look out for
Shopping around for suitable options and conducting comparisons will be beneficial when choosing your super fund. Some things to take note of include:
- The fund’s track record and member reviews
- Fees associated with the super fund
- If the fund offers life insurance and disability cover
- In the fund offers investment options suitable for your comfort with risk
- Any additional services the fund can offer