Superannuation was introduced by the Federal Government as a compulsory way for workers to save for retirement.
There are rules that determine when you can access your super. The more super you save before then might make a difference to your lifestyle when you stop working.
How does it work?
Generally, if you're earning $450 or more before tax in a calendar month in Australia, your employer should be contributing a percentage of your earnings directly into your super fund. This is even if you’re a temporary resident of Australia. It’s called Super Guarantee (SG) and the amount is currently 9.5% of your earnings, increasing incrementally to 12% by 1 July 2025.
Employees under 18 must earn over $450 a month before tax and be working more than 30 hours a week to be eligible. Employers do not have to contribute to super for some non-residents and some senior executives who hold certain visas. Members of the naval, army or air force reserves do not receive SG contribution from the Australian Defence Force unless they are Reserves on continuous full-time service.
Choosing a fund
Most workers can nominate a super fund where they want contributions from their employer to be paid. You'll need to tell your employer which fund you'd like your SG paid into each time you change jobs.
If you don't nominate a fund, your employer will pay your super contributions to a default super fund. Default super funds need to be MySuper compliant, meaning they meet certain standards set by the government.
There are many super funds to choose from with different benefits and services. When choosing a fund for your super, look at all the costs and benefits to make sure you pick one that best suits your needs.
What happens to your super?
Super funds invest your super contributions for you, with professional investment managers aiming to achieve growth over time.
Most funds offer either single investment strategies where you choose the investment fund from a range of options, or a lifecycle approach. A lifecycle approach is designed to move your super balance as you move through lifestages with investments focused on growth when you are young and moving to more conservative investments as you age and are closer to retirement.
However, most funds also allow members to select from a range of investment options based on their own preferences.
Finding and consolidating super
It’s possible, if you have had more than one job, or several part-time jobs, that you might have more than one super account.
Depending on the employer’s default super plan, many people end up with new accounts in various funds when they change jobs. This can make it difficult to keep track of where all your super is. You can view and consolidate your existing super accounts through your myGov account.
Before you make any changes to consolidate your super, consider whether you can transfer any insurance cover, replace any insurance cover you will lose, as well as any withdrawal fees from other super funds.
You should also compare the costs, risks and benefits of your super funds and consider any investment or tax implications.
Topping up your super
It’s difficult to know how much you might need to live the life you want in retirement. Many people underestimate the amount of super that will be needed.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has researched some benchmark annual budgets that might give you some idea of what you could need for a ‘comfortable’ or ‘modest’ retirement lifestyle.
There are different ways you can contribute extra money into your super that may also be tax effective, but it’s important to be familiar with the contribution limits and possible implications of each of these. You can check the Australian Taxation Office (ATO) website for the most up-to-date information about contribution caps.