There are many jargons associated with the word super in Australia. Therefore, we have explained frequently asked questions in simple terminology for you to understand how you can make your super work for you in retirement.
Superannuation, also known as Super in Australia, is a term used for retirement pension benefit funds. Employers make regular contributions when you work with them. The employer should pay 10% of your salary into a super fund as of now in 2022 through Superannuation Guarantee (SG).
The money that is deposited into your super account is invested, and the growth is again re-invested so that the balance keeps growing. This is done so that when you retire and d not have a regular income, you can access your superannuation apart from the age pension to support your lifestyle.
Most people who work in Australia are eligible for super which means your employer has to pay 10% SG of your salary. You should be over 18 years and get paid more than $450 (before tax) in a month to be eligible. If you are under 18 but getting paid a minimum salary of $450 (before tax) in a month and work at least 30 hours a week, then you become eligible for super. You may be working full time,e or part-time, which does not affect the employee’s SG contribution.
If you are under 60 years old, it is generally taxed between 17% and 22%. But, if you are older than 60 years old, you will not be taxed.
If you’re an Australian permanent resident or citizen heading overseas, the rules are the same, and your super remains subject to the same rules. This applies even if you are leaving Australia permanently. This also means your super must stay in your super fund until you reach your preservation age and are eligible to access it.
You can get your super when you retire and reach your ‘preservation age’ — between 55 and 60, depending on when you were born.
Apart from your employer’s contributions, even you can add to your super by making a contribution. You can salary sacrifice to super. There is a cap limit on how much you can contribute each financial year, though, without having to pay additional tax.
When you wish to withdraw your superannuation after you reach the preservation age, you can choose how you wish to receive the money. It could be a lump sum payment, a steady retirement income stream, or a mixture of both.
You are entitled to an age pension when you reach an age of over 67 years. This will happen only if your income and assets are below a specified level. The full pension is valued as $766 every two weeks for singles and $577.40 each for couples which can reduce by 50% over $160 every two weeks for singles or $284 for couples.
Super is calculated by simply multiplying your gross salary by 10%. This is also known as the superannuation guarantee (SG). Only Ordinary Time Earnings (OTE) are taken into consideration while calculating super, and overtime and expenses are generally excluded. Sometimes bonuses and allowances get included, though.
The super rate has increased from 9% to 10% since July 2021, and it will stop at 12 percent in July 2025.
When a person dies, their super is paid to their dependants in most cases. You can also nominate someone dependent on you to redirect the money to them. When a person’s super is paid after their death, it’s called a ‘death benefit.’
There are different types of super funds you can choose from. You need to go through each one in detail to understand what works best for you. Your employer needs to give you a standard choice form within 28 days of you working for them so that you can give your choice in writing. Learn more about choosing super fund in detail.
You need to reach preservation age to be able to use your super to buy a house to live in. But the money needs to be withdrawn from a super account, and there will be tax consequences of the same, which you need to understand.
You cannot directly transfer superannuation money between different individuals, even if it is to your spouse. But you have the option of withdrawing some funds from your super and re-contributing them to another person’s super account.
You can only have early access to your super in very limited circumstances. You should be aware of promoters who claim to offer early access to your super. They promise to transfer your super to a self-managed super fund. These schemes are illegal, and if you get involved, you may have to pay heavy penalties. For more information, check the same on the ATO site.
There are definitely a few exceptions, such as domestic workers who work less than 30 hours a week do not get paid SG.
Yes, you can choose to make personal contributions as a way of saving for your retirement.
Ensure your super fund has your Tax File Number (TFN) which makes it easier to track the super. It also helps when you need to move it between accounts and receive super payment from your employer or government.
This can be a plain mistake, which is why talk to your employer first to sort this out on your level. Check your last statement to confirm if your employer has paid you the pending super. If that does not happen and you still believe you are entitled to more super money, you can call ATO on 13 10 20.
Super is a vast area you need to understand. If you have more queries, feel free to ask them in the comments below, and we will answer them for you quickly.