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Learn more about superannuation

Superannuation is a tax-effective way to build up your retirement nest egg over your working life – ideally so you don’t have to rely on the government pension.

Employer superannuation contributions are mandatory in Australia and have been since 1992. The aim is for all Australians to maintain and enjoy their quality of life in retirement.

Because superannuation is a long-term investment, finding a super fund that suits your lifestyle and income is essential. With so many options, there’s a lot to consider when running a superannuation search.

We’ve put together a comprehensive guide to make your superannuation search easier.

How does superannuation work?

Before you start a superannuation search, it’s important to understand how superannuation works. If you’re an Australian citizen and you’re employed by an Australian company, your employer has to make compulsory superannuation contributions on your behalf. The current superannuation guarantee is 9.5 per cent of your gross salary. Given the fact that Australians are living longer into retirement, the rate is set to steadily increase to 12 per cent by 2025.

When you start a new job, you’ll need to provide your employer with details of your superannuation fund. If you don’t nominate a super fund, your employer will pay your compulsory contributions into a fund they nominate. Once they’ve received the contributions, your superannuation fund will invest the money on your behalf with the intention of growing your super balance steadily, until you retire. When you’re ready to retire, you can choose to access your super in a lump sum or take it as a regular income stream or opt for a combination of the two.

It’s in your interest to search for a superannuation fund that makes the best sense for you and gives you the greatest return. Superannuation payments are usually made every quarter and, depending on the fund you choose, you may be able to track your superannuation balance online, via an app, or in a statement sent to you by your superannuation fund.

There are a few circumstances where superannuation contributions are not mandatory, including:

  • If you’re an employee and you earn less than $450 a month
  • If you’re under 18 and work less than 30 hours each week
  • If you’re not an Australian resident and you work outside Australia

Superannuation is also not currently compulsory for Australians who are self-employed. Even though it’s not mandatory, it’s recommended that self-employed Australians make super contributions and invest in their retirement.

How can I add to my super?

When you’re running a superannuation search, you may notice that there are various ways you can contribute to your super fund and boost your super balance.

Employer contributions are generally the main source of super because it’s mandatory for all Australian employers to contribute at least 9.5 per cent of an employee's gross salary into their nominated super account. This is generally where the majority of our super comes from. To account for increased costs of living and greater life expectancy, there are plans for this to be increased to 12 per cent by 2025.

Depending on how much you earn, you may also choose to make concessional contributions to your superannuation account. To do this, you can arrange for your employer to salary-sacrifice a portion of your pre-tax salary into your super fund. In addition to growing your super balance, there are some tax advantages to making concessional contributions. What you’re essentially doing is reducing your taxable income and taking advantage of the fact your concessional contributions will be taxed at just 15 per cent. There are limits, though, to how much you can contribute to your super via concessional contributions.

While concessional contributions are made from your pre-tax salary, you also have the option to make non-concessional contributions from your post-tax salary. This isn’t generally as tax-effective, and there are also limits on the amount you can contribute from your post-tax salary.

Low-income earners may be eligible for the government co-contribution if their income is below a certain threshold and they choose to make non-concessional contributions. Government co-contributions work by adding $0.50 for every post-tax dollar you deposit into your super balance. There is a cap on the amount the government will co-contribute. Low income earners may also be eligible for the Low-Income Superannuation Tax Offset.

How to search for superannuation funds

With so many different options on the market, searching for a superannuation fund can be complicated.

When you’re conducting a superannuation search, it’s easy to get overwhelmed. You’re essentially looking a super fund that fits your needs and gives you the greatest return on your contributions.

Here are the things you need to compare in your superannuation search:

Investment options

Start by looking at what investment options the fund offers and look at the historical performance to get a gauge on what type of returns you might be able to expect.

While past performance is not a guarantee for future returns, looking back at the returns in the past five years may give you a very rough idea of the return you can expect.

When it comes to investment options, some people prefer having the flexibility to pick their investments. If you want a fund that lets you choose your investment based on industry or life stage, search for a super fund that suits your preference.

Depending on your level of interest and ability, some funds let members do their own investing. If you prefer a greater say in your investments, look for a fund that gives you the control to put your money where you want it.

Some managed super funds offer an ethical investment option. If you prefer your funds to be invested in, say, renewable energies as opposed to mining, then search for a superannuation fund that offers the investment options you’re looking for.

Fees

Aside from investment options, the other element you’ll want to consider on your superannuation search is fees. Generally speaking, the lower the fees, the better.

As superannuation is generally a long-term investment, fees can add up considerably over time.

When it comes to assessing fees, the main question you want to ask yourself is: ‘Is it worth it?’ Consider whether the fees you pay will help you get a great return on your superannuation. Not all fee structures are the same – some funds charge additional fees for extra services like advice or different types of investments. Before you make any decisions, find out exactly what the fees are for and work out if the costs outweigh the benefits.

Insurance

When you’re searching for superannuation, you may notice different types of insurance offered by each fund.

The majority of superannuation funds will offer insurance as an option, and one of the advantages of taking insurance through your superannuation fund is that the policies are often discounted. Terms and conditions of insurance funds within super differ greatly, so do your research to make sure the type of cover holds up if you need it and that the premiums are worth the cost.

Common types of insurance within a super fund are:

  • Life insurance
  • Total and permanent disability (otherwise known as TPD insurance)
  • Temporary inability to work (otherwise known as income protection insurance)

It’s worth noting that some funds offer insurance on an opt-in basis, which means that it’s not automatically enabled when you open the super account. Check the details to make sure you’re covered.

While these are the more standard elements to compare in your superannuation search, it’s worth asking if a potential super fund has any other benefits such as a contribution-matching deal or any industry-specific training.

How do I switch super funds?

If you’ve spent some time searching for the right superannuation fund and you’ve compared your options, you may decide to switch super funds. Before you make the switch, look out for any exit or withdrawal fees you’d be charged for moving your super fund to a different fund. Some funds may penalise you for moving and, depending on your age, circumstances and super balance, this may affect your insurance cover and benefits.

In theory, making the switch is relatively simple and can be done anytime you want, but before you make any decisions, we recommend spending some time searching for a superannuation fund that fits your needs and lifestyle.

Frequently asked questions

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.

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.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

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SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

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Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

How can I increase my superannuation?

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

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 do I change my superannuation fund?

Changing superannuation 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.

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.

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

As a contractor, you’re entitled to superannuation 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 superannuation even if you have an Australian business number (ABN).

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.

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.

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

Yes, permanent and temporary residents are entitled to superannuation.

Can I take money out of my superannuation fund?

Superannuation is designed to provide Australians with money in their retirement. The government has strict rules around when people can take that money out of their fund because it wants to prevent people eroding their savings before they reach retirement.

As a general rule, you can only take money out of your superannuation fund when you reach:

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

That said, you can take money out of your superannuation fund early based on one of these seven special conditions:

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

What contributions can SMSFs accept?

SMSFs can accept mandated employer contributions from an employer at any time (Funds need an electronic service address to receive the contributions).

However, SMSFs can’t accept contributions from members who don’t have tax file numbers.

Also, they generally can’t accept assets as contributions from members and they generally can’t accept non-mandated contributions for members who are 75 or older.

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.

What happens to my superannuation when I change jobs?

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

When can I access my superannuation?

You can withdraw your superannuation 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 1 July 1964 60

A transition to retirement allows you to continue working while accessing up to 10 per cent of the money in your superannuation 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

 

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 many superannuation funds are there?

There are more than 200 different superannuation funds.

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.

How do you calculate superannuation?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been 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.