Superannuation

What is Superannuation

Superannuation refers to the arrangements made in Australia for individuals to accrue funds to save for and replace income in retirement. Superannuation is applicable to both domestic and international workers, however, there are certain exceptions for low income earners and contractual workers.

It is money set aside by your employer over your working life for you to live on when you retire. It’s a compulsory system where a minimum percentage of your income must be placed into a super fund.

Your super is invested in a range of assets to help grow your balance over time. You can keep track of your super and make extra contributions to boost your savings.

If you are a temporary visa holder, you may be entitled to superannuation contributions from your employer. You can claim your super when you leave Australia.

Employers are required by the Australian Government to pay a minimum amount known as the “superannuation guarantee” to a designated superannuation fund for their employees. Employees can choose to make personal contributions on top of this amount.

Choosing a Superannuation Fund

Superannuation begins when starting work and the employer starts paying a portion of the salary or wages into a super fund. Employees can choose from many superannuation funds and advise the same to their employers. Most employees will have agreements with an Australian Superannuation company where they will deposit the superannuation amount by default if not advised by the employee.

Super funds invest money in many things, such as shares, property and managed funds. They may also offer different types of insurance, such as income protection. Individuals can also choose how their savings are invested. Some fund investment strategies offer higher returns with higher risks, while others offer greater security for money but with lower returns.

Tax on Superannuation

Tax treatment of Superannuation for individuals may differ slightly based on incomes, when and how the super is withdrawn. In general Compulsory employer contributions and income earned in the fund are taxed at the concessional rate of 15%, or more for higher income earners. Income retrieved from the fund after preservation age is generally tax free. More Details https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/tax-and-super

Accessing & Withdrawing Super

As superannuation is money invested for an individual’s retirement benefit, strict government rules prevent early access to benefits except in very limited and restricted circumstances. These circumstances are mainly related to specific medical conditions or severe financial hardship.

In normal circumstances super can be accessed when individuals turn 60, also called the preservation age. Individuals in these cases can choose to receive accrued amount as an income stream to provide for a regular income, withdraw all of a part as lump sum or a combination of both.

In certain cases foreign nationals may be able to withdraw their superannuation funds on termination of employment & work visa in Australia and when they permanently decide to expatriate to their home country. In such circumstances the super must be claimed within 6 months of leaving the country.

The Australian Prudential Regulation Authority (APRA) supervises regulated superannuation funds and Approved Deposit Funds and Pooled Superannuation Trusts, all of which are regulated under the Superannuation Industry (Supervision) Act 1993 . More details http://www.apra.gov.au/Super/Pages/default.aspx

Self Managed Superannuation funds are supervised by the Australian Taxation Office. More Details Super for individuals and families | Australian Taxation Office