In Australia superannuation is the way of saving money for retirement while you're working. So if you’re new to the workforce or just new to super, here are steps towards understanding your super and staying on track.
Are you employed?
If you’re over 18 and earn more than $450 per month, your employer generally has to pay you super. If you’re under 18 and working 30 hours a week or more, you should also be paid super.
If you’re a contractor, you may be entitled to super if you’re being paid for your labour, even if you invoice using an Australian Business Number (ABN).
Choosing your super fund
When you start a new job, your employer should give you information about your super choices and let you know what their default super fund is. You may also be able to choose your own fund. If you’re unsure, speak to your employer.
To let your employer know which super fund they should make contributions to, simply complete a standard super choice form from the Australian Taxation Office (ATO) or use the one provided by your employer.
Contributions into your super
Once you start work, your employer needs to pay contributions into your super account, currently equal to 9.5% of your salary. This will increase to 10% by 1 July 2021, and then gradually increase to 12% by 1 July 2025, which means more super for you.
- You can also make your own contributions from your after-tax salary, or you can ask your employer to make extra contributions from your before-tax salary.
- A before-tax contribution is called a salary sacrifice contribution. It can be an effective way of adding to your super, because these contributions are taxed at a maximum of only 15%, instead of your marginal tax rate.
- If you’re self-employed you may instead be eligible to claim a deduction for your own personal super contributions.
- It’s important to note that there are caps that limit the amount of contributions you can make tax-effectively, so always check that your contributions fall within the cap to avoid a higher tax rate.
Staying on track
Money in your super fund is typically invested in the option(s) you’ve chosen, for example, Global Shares, Australian Shares, Fixed Interest, Global Property, Cash, or a mixture of all. If you don’t make a choice, your money will be invested in the default investment option of the fund. Some funds also offer Lifestage options, which invest your super based on your age. As you get closer to retirement, your investment mix will change to include more defensive assets, like Cash and Fixed Interest.
To help you keep track, your super fund will also send you regular statements to let you know how your savings are going.
Don’t forget about your super when you start a new job. If you’re able to choose your own fund, simply complete a Super Choice form with your existing super fund’s details and hand it to your new employer.
If you’re unable to choose your own fund, you may want to transfer your existing super into your new fund. Having all of your super in the one fund makes it easier to keep track of your money, as well as potentially helping you save on fees. Before you make any changes to your super, you should consider things such as any insurance cover you may have and any exit fees.
Accessing your money
Generally, your superannuation money needs to stay invested until you’re ready to retire and have reached your ‘preservation age’, which is between age 55 and 60 depending on your date of birth. Unless you’re experiencing severe financial hardship, or you’re incapacitated or seriously ill, you will not be able to access it before then.