In Australia superannuation is a compulsory 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 18 or over and earn more than $450 per month1, your employer generally has to pay you super. If you’re under 18, earn more than $450 per month and working 30 hours a week or more2, you should also be paid super.
If you’re a contractor, you may be entitled to super if you’re being paid primarily for your personal labour (eg you’re paid for hours worked, rather than to achieve a result), 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 or visit the ATO for more information.
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 could be an effective way of adding to your super, because these contributions are taxed at only 15%, instead of your marginal tax rate.3
- You may also be eligible to claim a tax deduction for your own personal after-tax 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 paying more tax.
Staying on track
Money in your super fund is typically invested in the option(s) you’ve chosen. Some examples include 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.4 This is generally an investment option that has a balanced mix of defensive and growth assets. 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 investments are going.
Don’t forget about your super when you move to 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. This can be done online through your myGov account. Having all of your super in the one fund makes it easier to keep track of your money, and could potentially help you save on fees. Before you make any changes to your super, you should consider things such as any insurance cover you may have in your existing super account.
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 won’t be able to access it before then.
1 Section 27(2) [Salary or wages: general exclusions] Superannuation Guarantee Administration Act 1992
2 Sections 28 [Salary or wages: excluded earnings of young persons] and 6(1) definition of part-time employee, Superannuation Guarantee Administration Act 1992
3 Members whose taxable income and super contributions exceed $250,000 will be subject to an additional 15% tax on their contributions above $250,000.
4 If you haven't chosen your super fund in the past and you have just gone with the fund your employer selected, your super will have been automatically transferred into a MySuper account. Please see the ASIC MoneySmart website for more information on MySuper: https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/choosing-a-super-fund/mysuper