- If you are an adult (i.e. 18 or over) earning greater than $450 per month you must contribute to your own super; you may choose which fund it sits in.
- Currently employers must contribute 9.5% towards each employee’s super, but this is set to increase. Super contributions are taxed at a lower rate than other income, at 15% until your income goes beyond $300,000 per year and it is taxed at 30%
- Because of this low tax rate many people make salary sacrifice voluntary contributions to their fund above the 9.5% of their salary
how super works
- Super funds operate similarly to managed investments (specifically unit trusts).
- You may choose the style and risk appetite of your fund and the managed investments.
- There are four types of super fund, the self managed, corporate, retail and industry. Self managed funds are complicated but may be of benefit if the amount of super is large.
- Retails funds are run for-profit and can provide better engagement with the investment portfolio. Corporate funds are run by your employer; industry super funds often have the lowest fees and are run not-for-profit.
- Asset classes can be broadly described as either defensive or growth. Defensive include cash and fixed interest while growth includes property and equities.
- Further, you have the choice of investing multi-asset, across multiple asset classes or single asset classes. If investing multi-asset, your default portfolio will be balanced known as the My Super.
- If investing in single asset classes you have many choices, one of which is cash which will provide a low-risk alternative to the rest.
- Having money in different super funds may provide advantages, like different investment performance and insurance options, but it can also be problematic. These problems may include fees, administrative problems, and the risk of losing some of your super.
- Your preferred super fund, and the Department of Human Services can assist in consolidating your super by advising the funds to consolidate or migrate your super as you direct.
access to super
- Before you can access your super you must reach the preservation age and be retired, or be aged 65 (and over).
- However in certain circumstances the government may release your super early. This may be because of financial difficulty or because you are permanently leaving the country.
Conduct research on at least 5 different superannuation funds, preferably different types (i.e. retail, industry). You can use websites like Canstar to do this research. Try to get a feel for how funds can be compared in relation to number of investment options, performance, fees, insurance offered, and possible member benefits.
Select a superannuation fund that you feel best meets your preferences (once you are 18+ years old, and commence work). Note that for many forms of employment, superannuation is compulsory.
When you sign up to a superannuation fund, keep your membership details in a safe place. These membership details can be used to keep track of your superannuation online, and from this portal you manage which investment options you would like your account balance to sit in.
Research to see if you can build on your superannuation through government co-contribution schemes. There are also some circumstances where you may be able to claim superannuation contributions as a tax deduction, for example if you are self-employed. The ATO has more information on this.
If you change jobs, it is possible that your employer might offer to submit contributions into a new superannuation fund. Unless the new fund offers benefits over your existing fund, remain inclined to have these contributions submitted to your existing fund. See topic Consolidating Super to see the benefits of housing your superannuation in one fund. If you lose track of your superannuation at some point, you can track this if you have a MyGov Account (you will also need to set up an ATO account).
Monitor your superannuation regularly (e.g. every 6-12 months). Make sure that your employer is correctly submitting contributions (they can sometimes make mistakes).
Plan your retirement many years before you intend on retiring. With life expectancies increasing in Australia, you will probably need more money than you think in preparation for this stage of life. Note that financial planners can assist you with retirement planning strategies.
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