Everything you need to know about superannuation

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Everything you need to know about superannuation


Basics of superannuation

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into yoursuper fund by your employer.

Is superannuation compulsory?

Super is compulsory. It can’t be touched until you’re at least 55 years old.

What is the superannuation guarantee rate?

The super guarantee rate is the percentage of your salary that your employer must pay into your superannuation fund. The super guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Who is entitled to superannuation?

Superannuation accounts can be opened by Australians, permanent residents and temporary residents. You’re automatically entitled to super if:

  • You're over 18 and earn more than $450 before tax in a calendar month
  • You're under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Who pays superannuation?

Super is paid by employers.

How is superannuation regulated?

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

What are concessional contributions?

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

How is superannuation taxed?

Super 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 super 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 can I keep track of my superannuation?

Most funds will allow you to access your superannuation account online. Another option is to manage your super through myGov, which is a government portal through which you can access a range of services, including Medicare, Centrelink, aged care and child support.

Superannuation and employment

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

Most people can choose their own super 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 super fund, your employer will choose one for you.

How often do employers have to pay superannuation?

Employers must pay super at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

What happens to my superannuation when I change jobs?

You can keep your super fund for as long as you like, so nothing happens when you change jobs. Please note that some super funds have special features for people who work with certain employers, so these features may no longer be available if you change jobs.

What happens if my employer falls behind on my superannuation payments?

The Australian Taxation Office will investigate if your employer falls behind on your super payments or doesn’t pay at all.

Can my employer use money from my superannuation account?

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

What happens if my employer goes out of business while still owing me superannuation?

If your employer collapses, a trustee or administrator or liquidator will be appointed to manage the company. That trustee/administrator/liquidator will be required to pay your super out of company funds.

If the company doesn’t have enough funds, in some cases company directors will be required to pay your super. If the directors still don’t pay, the Australian Securities & Investment Commission (ASIC) might take legal action on your behalf. However, ASIC might decline to take legal action or might be unsuccessful. There might be some circumstances when you don’t receive all the super you’re owed.

Am I entitled to superannuation if I’m a casual employee?

As a casual employee, you’re entitled to super if:

  • You're over 18 and earn more than $450 before tax in a calendar month
  • You're under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Am I entitled to superannuation if I’m a part-time employee?

As a part-time employee, you’re entitled to super if:

  • You're over 18 and earn more than $450 before tax in a calendar month
  • You're under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Am I entitled to superannuation if I’m a contractor?

As a contractor, you’re entitled to super if:

  • The contract is mainly for your labour
  • You're over 18 and earn more than $450 before tax in a calendar month
  • You're under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Please note that you’re entitled to super even if you have an Australian business number (ABN).

Am I entitled to superannuation if I’m not an Australian citizen?

Yes, permanent and temporary residents are entitled to super.

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

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

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

Employers are required to pay super 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

Choosing a superannuation fund

How do I open a superannuation account?

Opening a super account is simple. 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 super 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.

How many superannuation funds are there?

There are more than 200 different super funds.

What are the different types of superannuation fund?

There are five different types of super fund:

  • Retail funds - usually run by banks or investment companies.
  • Industry funds - originally designed for workers from a particular industry, but are now open to anyone.
  • Public sector funds - originally designed for people working for federal or state government departments. Most are still reserved for government employees.
  • Corporate funds - arranged by employers for their employees.
  • Self-managed super funds - private super funds that allow people to directly invest their money.

What is the difference between accumulation and defined-benefit funds?

A majority of Australians are in accumulation funds. These funds grow according to the amount of money invested and the return on that money.

A minority of Australians are in defined-benefit funds – many of which are now closed to new members. These funds give payouts according to specific rules, such as how long the worker has been with their employer and their final salary before they retired.

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.

What fees do superannuation funds charge?

Super funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

How do I choose the right superannuation fund?

Different super funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

You need to ask yourself these four questions when comparing super funds:

  • How many fees would I have to pay and what would they cost?
  • What insurances are available and how much would they cost?
  • What investment options does it offer? How would they match my risk profile and financial needs?
  • How have these investment options performed historically?

What will the superannuation fund do with my money?

Your money will be invested in an investment option of your choosing.

What is MySuper?

MySuper accounts are basic, low-fee accounts. If you don’t nominate a super fund, your employer must choose one for you that offers a MySuper account.

MySuper accounts offer two investment options:

  1. Single diversified investment strategy

Your fund assigns you a risk strategy and investment profile, which remain unchanged throughout your working life.

  1. Lifecycle investment strategy

Your fund assigns you an investment strategy based on your age, and then changes it as you get older. Younger workers are given strategies that emphasise growth assets, while older workers are given strategies that emphasise defensive assets.

Changing superannuation funds

How do I change my superannuation fund?

Changing super funds is a common and straightforward process. You can do it through your MyGov account or by filling out a rollover form and sending it to your new fund. You’ll also have to provide proof of identity.

How do I combine several superannuation accounts into one account?

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

What is lost superannuation?

Lost super refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

How can I find lost superannuation?

You can use your MyGov account to see details of all your super accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

What happens to my insurance cover if I change superannuation funds?

Some super funds will allow you to transfer your insurance cover, without interruption, if you switch. However, others won’t. So, it’s important you check before changing funds.

Making additional contributions

How can I increase my superannuation?

You can increase your super through a ‘salary sacrifice’. This is where your employer takes part of your pre-tax salary and pays it directly into your super account. Like regular super contributions, salary sacrifices are taxed at 15 per cent when they are paid into the fund.

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

What are personal contributions?

A personal contribution is when you make an extra payment into your super account. The difference between personal contributions and salary sacrifices is that the former comes out of your after-tax income, while the latter comes out of your pre-tax income.

What are government co-contributions?

A government co-contribution is a bonus payment from the federal government into your superannuation account – but it comes with conditions. First, the government will only make a co-contribution if you make a personal contribution. Second, the government will only contribute a maximum of $500. Third, the government will only make co-contributions for people on low and medium incomes. The Australian Taxation Office will calculation whether you’re entitled to a government co-contribution when you lodge your tax return. The size of any co-contribution depends on the size of your personal contribution and income.

How much extra superannuation can I add to my fund?

There is an annual limit of $25,000 for concessional contributions – that is, money paid by your employer and extra money you pay into your account through salary sacrificing. There is also a limit on non-concessional contributions. Australians aged between 65 and 74 have a limit of $100,000 per year. Australians aged under 65 have a limit of $300,000 every three years.

How can first home buyers use superannuation to save for their first home?

The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So, if you pay $15,000 per year into the First Home Super Saver Scheme, you should make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

Can I transfer money from overseas into my superannuation account?

Yes, you can transfer money from overseas into your superannuation account – under certain conditions. First, you must provide your tax file number to your fund. Second, if you are aged between 65 and 74, you must have worked at least 40 hours within 30 consecutive days in a financial year. (Australians under 65 aren’t subject to a work test; Australians aged 75 and over cannot receive contributions to their superannuation account.)

Money transferred from overseas will generally count to both your concessional contributions limit and your non-concessional contributions limit. You will have to pay income tax on the applicable fund earnings component of any money transferred from overseas. You might also be liable for excess contributions tax.

Retirement

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

What are the age pension’s age rules?

Australians must be aged at least 65 years and 6 months to access the age pension. This eligibility age is scheduled to increase according to the following schedule:

Date Eligibility age
1 July 2019 66 years
1 July 2021 66 years & 6 months
1 July 2023 67 years

What are the age pension’s residence rules?

On the day you claim the age pension, you must be in Australia and you must have been an Australian resident for at least 10 years (with no break in your stay for at least five of those years).

The following exceptions apply:

  • You’re exempt from the 10-year rule if you’re a refugee or former refugee
  • You’re exempt from the 10-year rule if you’re getting Partner Allowance, Widow Allowance or Widow B pension
  • You can claim the age pension with only two years of residency if you’re a woman whose partner died while you were both Australian residents
  • You might be able to claim the age pension if you’ve lived or worked in a country that has a social security agreement with Australia

What is the age pension’s income test?

These are the rules for most people who want to claim the standard pension:

Single people

  • If your income per fortnight is up to $172, you’re entitled to a full pension
  • If your income per fortnight is over $172, your pension will reduce by 50 cents for each dollar over $172

Couples

  • If your income per fortnight is up to $304, you’re entitled to a full pension
  • If your income per fortnight is over $304, your pension will reduce by 50 cents for each dollar over $304

These are the rules for most people who want to claim the transitional pension:

Single people

  • If your income per fortnight is up to $172, you’re entitled to a full pension
  • If your income per fortnight is over $172, your pension will reduce by 40 cents for each dollar over $172

Couples

  • If your income per fortnight is up to $304, you’re entitled to a full pension
  • If your income per fortnight is over $304, your pension will reduce by 40 cents for each dollar over $304

For most people, the age pension cuts off if your fortnightly income exceeds these thresholds:

Category Fortnightly income
Standard pension for singles $1,987.20
Standard pension for couples living together $3,040.40
Standard pension for couples living apart due to ill health $3,934.40
Transitional pension for singles $2,077.00
Transitional pension for couples living together $3,378.00
Transitional pension for couples living apart due to ill health $4,114.00

What is the age pension’s assets test?

The value of your assets affects whether you can qualify for the age pension – and, if so, how much.

The following assets are exempt from the assets test:

  • Your principal home and up to two hectares of used land on the same title
  • All Australian super investments from which a pension is not being paid – this exemption is valid until you reach age pension age
  • Any property or money left to you in an estate, which you can’t get for up to 12 months
  • Acemetery plot and a prepaid funeral, or up to two funeral bonds, that cost no more than the allowable limit
  • Aids for people with disability
  • Money from the National Disability Insurance Scheme for people with disability
  • Principal home sale proceeds you’ll use to buy another home within 12 months
  • Accommodation bonds paid on entry to residential aged care
  • Any interest not created by you or your partner
  • ASpecial Disability Trust if it meets certain requirements
  • Your principal home, if you vacate it for up to 12 months
  • Granny flat rights where you pay more than the extra allowable amount

For full pensions, reductions apply when your assessable assets exceed these thresholds:

Category Home owners Non-home owners
Singles $258,500 $465,500
Couples living together $387,500 $594,500
Couples living apart due to ill health $387,500 $594,500

Couples with only one partner eligible

$387,500 $594,500

For part pensions, reductions apply when your assessable assets exceed these thresholds:

Category Home owners Non-home owners
Singles $561,250 $768,250
Couples living together $844,000 $1,051,000
Couples living apart due to ill health $993,000 $1,200,000

Couples with only one partner eligible

$844,000 $1,051,000

For transitional rate pensions, reductions apply when your assessable assets exceed these thresholds:

Category Home owners Non-home owners
Singles $512,500 $719,500
Couples living together $797,500 $1,004,500
Couples living apart due to ill health $895,500 $1,102,500

Couples with only one partner eligible

$797,500 $1,004,500


How much money do you get on the age pension?

Pension payments can be reduced due to the income test and asset test (see ‘What is the age pension’s income test?’ and ‘What is the age pension’s assets test?’). Here are the maximum fortnightly payments:

Category Single Couple each Couple combined Couple apart due to ill health
Maximum basic rate $826.20 $622.80 $1,245.60 $826.20
Maximum pension supplement $67.30 $50.70 $101.40 $67.30
Energy supplement $14.10 $10.60 $21.20 $14.10
TOTAL $907.60 $684.10 $1,368.20 $907.60

How much money will I need to retire?

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 $526 $757
Comfortable $822 $1,159

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

Lifestyle Singles Couples
Modest $70,000 $70,000
Comfortable $545,000 $640,000

These figures come from the March 2018 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 City
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 Cask 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

When can I withdraw my superannuation?

You can withdraw your super when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age – which is different to the pension age – is based on date of birth. Here are the six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1July 1964 60

A transition to retirement allows you to continue working while accessing up to 10 per cent of the money in your super account at the start of each financial year.

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

How can I claim my superannuation?

There are three different ways you can claim your super:

  • Lump sum
  • Income stream
  • Part lump sum and partincome stream

Two rules apply if you choose to receivea super income stream:

  • You must receive payments at least once per year
  • You must withdraw a minimum amount per year
    • Age 55-64 = 4%
    • Age 65-74 = 5%
    • Age 75-79 = 6%
    • Age 80-84 = 7%
    • Age 85-89 = 9%
    • Age 90-94 = 11%
    • Age 95+ = 14%

Why can't I withdraw my superannuation when I like?

Superannuation is designed to provide Australians with money in their retirement. The reason the government doesn’t allow people to withdraw their superannuation (with a few rate exceptions) before preservation age is because it fears some people would erode some or all of their savings before they reach retirement.

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