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Learn more about superannuation
What is a superannuation fund?
A superannuation fund is an institution that is legally allowed to hold and invest your superannuation. There are more than 200 different superannuation funds in Australia. They come in five different types:
- Retail funds
- Industry funds
- Public sector funds
- Corporate funds
- Self-managed super funds
Retail funds are usually run by banks or investment companies.
Industry funds were originally designed for workers from a particular industry, but are now open to anyone.
Public sector funds were originally designed for people working for federal or state government departments. Most are still reserved for government employees.
Corporate funds are arranged by employers for their employees.
Self-managed super funds are private superannuation funds that allow people to directly invest their money.
What age can I withdraw my superannuation?
You can withdraw your superannuation (or at least some of it) when you reach ‘preservation age’. The preservation 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 1 July 1964||60|
When you reach preservation age, you can withdraw all your superannuation if you’re retired. If you’re still working, you can begin a ‘transition to retirement’, which allows you to withdraw 10 per cent of their superannuation each financial year.
You can also withdraw all your superannuation once you reach 65 years.
Am I entitled to superannuation if I'm not an Australian citizen?
Yes, permanent and temporary residents are entitled to superannuation.
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
Is superannuation paid on unused annual leave?
If your employment is terminated, superannuation will not be paid on unused annual leave.
How much superannuation should I have at age 40?
The amount of superannuation you should have at age 40 is based on how much money you need to have at retirement. That, in turn, is based on how much money you expect to spend each week during your retirement. That, in turn, depends on whether you expect to lead a modest retirement or a comfortable retirement.
The Association of Superannuation Funds of Australia (ASFA) estimates you would need the following amount per week:
Here is the superannuation balance you would need to fund that level of spending:
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:
|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|
How do you open a superannuation account?
Opening a superannuation 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 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 might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.
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.
How can I withdraw my superannuation?
There are three different ways you can withdraw your superannuation:
- Lump sum
- Account-based pension
- Part lump sum and part account-based pension
Two rules apply if you choose to receive an account-based pension (also known as an 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%
If you want to work out how long your account-based pension might last, click here to access ASIC’s account-based pension calculator.
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.
Can I buy a house with my superannuation?
First home buyers are the only people who can use their superannuation to buy a property. 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 have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.
How do I choose the right superannuation fund?
Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.
So you need to ask yourself these four questions when comparing superannuation 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?
How many superannuation funds are there?
There are more than 200 different superannuation funds.
Who can open a superannuation account?
Superannuation accounts can be opened by Australians, permanent residents and temporary residents. You’re automatically entitled to superannuation 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
What should I know before getting an SMSF?
Four questions to ask yourself before taking out an SMSF include:
- Do I have enough superannuation to justify the higher set-up and running costs?
- Am I able to handle complicated compliance obligations?
- Am I willing to spend lots of time researching investment options?
- Do I have the skill to make big financial decisions?
It’s also worth remembering that ordinary superannuation funds usually offer discounted life insurance and disability insurance. These discounts would no longer be available if you decided to manage your own super.