About super
Super is a long-term savings arrangement that is designed to provide you with an income for your retirement.
Your employer makes contributions on your behalf over time into a super fund or retirement savings account (RSA) so that when you retire from the workforce, you can access this money either as a lump sum or a super income stream.
Many people also make additional personal contributions to their super accounts.
Super savings are invested by investment professionals under the direction of fund trustees, so that over time the money builds into a larger amount. These savings are invested in a wide range of different assets such as shares and property, just like ordinary savings. Most super funds also provide members with the ability to choose from a range of investment options.
Lower tax rates on the contributions and investment earnings make super a much more tax efficient way to save for retirement.
What is the Super Guarantee?
Generally, if you are aged between 18 and 70, are regarded as an employee for superannuation purposes, and are paid $450 or more in a calendar month, your employer will be making Superannuation Guarantee (SG) contributions for you to a super fund or Retirement Savings Account (RSA). This applies whether you are a full-time, part-time or casual employee.
If you are paid under an award, some awards state that your employer must contribute super on your behalf, even if you earn less that $450 a month.
The super contribution your employer pays into a fund for you is based on a percentage of your Ordinary Time Earnings and is currently set at 9%.
When can I get my money?
Because of these special tax rates to encourage savings for retirement, the Government places restrictions on your ability to withdraw your super benefits prior to retirement. This is called preservation. Higher tax rates apply to those benefits able to be paid prior to reaching your preservation age, with the major exceptions being in cases of death or disability.
The annual member statement from your fund will show you how much of your super benefit must be preserved. Since 1 July 1999 all future super contributions (including those that are made from your post-tax income) generally are preserved until you retire and are 55 years old or older (the age limit is being increased to 60 for those born after 30 June 1964 with phasing in for those born after 1 July 1960). However, funds are now able to pay eligible members an income stream once they reach age 55 (or older for those born after 1 July 1960).
Contributions and balances that are from the period before 1 July 1999 are subject to some reasonably complex transitional arrangements and old rules about preservation, so you should contact your fund about what part of these amounts is subject to preservation.
Generally however, from 1 July 1999 the preserved component of your superannuation benefit can be paid prior to the preservation age and retirement if:
- you become permanently incapacitated;
- you die (see: If you die);
- in cases of severe financial hardship (if you meet the criteria set by the Government and the fund's trustees for early release of the benefit. The amount is also subject to Government set limits.);
- you have a terminal illness (if you meet the criteria set by the Government)
- on compassionate grounds (if you meet the criteria set by the Government and the Commonwealth Department of Human Services agrees to release the benefit); or
- your account has less than $200 and you change employers.
- From 1 July 2002, some temporary residents are able to access their superannuation once they have permanently departed Australia.
As explained above, some people over the age of 55 are able to access their super benefit in the form of an income stream (such as TransPension). These are often referred to as allocated pensions.
Source: ASFA Super Guru, ASFA’s guide to super for consumers.