Superannuation and YOU

Superannuation is a compulsory savings program that aims to ensure that when you retire you have some money to live on. If you are aged 18 years and over, are employed full-time, part-time or casual, and earn over $450 gross per month, your employer must make contributions into your super fund (called the ‘Superannuation Guarantee’) at a rate of 9% of your wage. If you're self-employed, you can set up your own super fund or join an existing one.

About super funds

Superannuation funds are similar to managed funds, but they have their own set of rules and are regulated by the Australian Prudential Regulation Authority (APRA). APRA's website is at www.apra.gov.au.

There are four basic kinds of super funds: Retail Funds, which are offered to the public by investment companies; Corporate Funds, which are sponsored by employers; Industry Funds which are for people who are in a particular industry, and are often linked to a union (many are also open to the general public); and Self-Managed (DIY) super funds, established by individuals for themselves.

Choosing a super fund

Previously, unless you were self-employed, you generally couldn’t choose the superannuation fund you wanted your Superannuation Guarantee payments paid into. That’s why when people changed jobs they often ended up with money in different funds.  This situation usually resulted in them having to combine them (‘roll them over’) into a single fund, both for convenience, and to save on fund management fees. Fortunately, the Federal Government legislated that from 1 July 2004, people in salaried employment can choose their own super fund. So take the time to shop around and choose a fund that will meet your financial needs.

Every fund also generally provides a choice of investment options, such as ones offering low risk but lower returns, and others with higher risks, but potentially delivering higher returns. Learn more about risk and return.

Boosting your super

You should work out how much money you want to have when you retire. Inflation (the increase in the cost of living) can really affect savings. For example, $50,000 in the year 2045 is going to buy a lot less than it does now. It’s likely that your Superannuation Guarantee payments are not going to be enough to support the lifestyle you expect, so making extra super payments from your salary can be a wise move.

If you decide to make additional ‘voluntary’ contributions, find out about "salary sacrifice". This is when you agree to give up part of your salary in return for your employer making additional contributions directly into your super account. You pay less tax on money that goes into your super fund this way – although there is a yearly limit.

Even small additional amounts added to your super, over time, could make a significant difference to the amount of the payout at your retirement. How your money is invested in the super fund you choose will also make a big difference, so take time to understand exactly what each investment is about, including its risk, and its returns. Learn more about investing.

Free money!

If your total annual income is $30,342 or less, for every dollar of voluntary super contributions you make, the Government will match it by $1.50 – up to a limit of $1,500 a year, tax free.

If you earn more than $30,342, government co-contributions reduce by 5 cents per dollar of income and phase out altogether when your income reaches $60,342 p.a.

To be eligible for government co-contributions you must also be in full-time, part-time or casual employment. Other conditions also apply. If you are self-employed you aren’t eligible for co-contributions. However, you may be able to claim a tax rebate on personal contributions.  

If you want to claim the government co-contribution you don’t need to fill in any application forms. You just submit your income tax return for the financial year. If you are eligible, the Australian Taxation Office will pay the co-contribution directly into your super account.

For more information on superannuation visit the Australian Taxation Office web site www.ato.gov.au.

Finding lost super If ever you switch jobs and lose track of your money in a super fund, it's easy to find it again. Just log onto the Australian Tax Office web address below. Click on the SuperSeeker link. Then scroll to the bottom of the page to 'Begin SuperSeeker search' and follow the instructions. You will need to provide your first name, surname, date of birth and Tax File Number. That's it! www.ato.gov.au/super.