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Essential Facts about Superannuation

What do you get from superannuation?

Superannuation is an excellent way to invest money for your retirement. Your retirement savings grow because money is paid in regularly, which your fund invests at low rates of tax. Tax concessions and other government benefits currently make superannuation one of the best ways to invest for the long term.

Superannuation funds may also offer life insurance cover, and total and permanent disability insurance. Some offer other types of insurance if you become disabled or sick for an extended period of time.

Are you entitled to superannuation contributions from your employer?

Employers must generally pay 9.5% of the value of your ordinary time earnings into a superannuation fund on your behalf (this is called the 'superannuation guarantee').

The main groups of employees who are not covered are:

  • paid less than $450 per calendar month
  • 70 years of age or over
  • under 18 years of age and working 30 hours a week or less
  • employed for domestic or private work for 30 hours a week or less
  • covered by a bilateral super agreement. This is for people working temporarily in some other countries. Contact the ATO for more information about these agreements.

For more information about your entitlement to superannuation guarantee payments, or to make a complaint if your employer is not paying superannuation contributions on your behalf, contact the Australian Taxation Office on 13 10 20, or visit their website at www.ato.gov.au

Boost your superannuation in your casual work Are you doing casual work or taking on extra hours in your existing job. If you are, then you may be able to boost your long-term savings by checking your eligibility for superannuation contributions from your employer.

  • If you're over 18, and earn more than $450 before tax in a calendar month, your employer is usually required to pay superannuation guarantee contributions on your behalf.
  • If you're under the age of 18 and work in excess of 30 hours a week, you may also be entitled to superannuation contributions from your employer.
  • Even if you normally don't work more than 30 hours per week, extra shifts may entitle you to superannuation payments.

Although superannuation isn't cash in your hand right now, it's an important investment for your future. It can be a great long-term investment too, because of tax concessions and other government benefits.

 Joining a superannuation fund

Choosing a superannuation fund is a bit like dating. Pick the right fund and you'll be set for a long, happy and comfortable life when you retire. Set your sights on the wrong one and you're in for a world of pain.

There are a few things you need to know when choosing a superannuation fund. Do your research and ask around before you commit yourself.

Check if you can choose your superannuation fund

Most people can choose the fund for their employer's superannuation contributions. However, some people who are covered by industrial agreements and members of defined benefit funds don't have this choice.

To find out if you can choose a fund, check with your employer or see the Australian Taxation Office's information on choosing a super fund.

If you do have a choice, your employer will give you a 'standard choice form' when you start work. The form sets out your options for choosing a super fund. You can select your own or go with your employer's fund.

Provide your tax file number when you join a superannuation fund. This ensures you're taxed at the special low rate and your superannuation account is less likely to get lost.

Things to compare

There are a few key things to consider when comparing superannuation funds. Spend some time looking at your choices.

Things to compare

What to look out for

Fees

The lower the better

Investment options

Make sure there are options that suit your   needs

Extra benefits

Your employer may pay more than 9.5% for   certain super funds or if you make extra contributions yourself

Performance

Pick a fund that has performed well over   the last 5 years - do not chase last year's best performer

Insurance

See what cover is available and what it   will cost

Service

Call the fund or browse their website to   see what other services they offer

Use the superannuation calculator to compare superannuation funds.

Superannuation Comparison Website

Superannuation comparison websites like these, publish ratings on super funds:

For more information see superannuation comparison websites.


How much gets paid into your superannuation?
Under the 'superannuation guarantee', your employer must pay in 9.5% of your earnings, for example an extra $4,500 if you earn $50,000 each year.

Most people's 9.5% is based on 'ordinary time earnings', which under the law means earnings for your ordinary hours of work. ‘Earnings’ is defined in more detail by law, by your terms of employment or by your superannuation fund trust deed. Visit the website of the Australian Taxation Office (ATO)

Your employer or you may pay extra money into superannuation at any time. If you're self-employed or not employed, you decide how much to pay in.

What type of fund can you join?
Fund rules control who may join. There are five basic types of funds.

Corporate funds

Open to people working for a particular employer or corporation. (Employers may run their own plan or run it through an investment manager or a master trust.)

Industry funds

Open to people in a particular industry or under a particular industrial award. Some industry funds are open to anyone.

Retail funds

Open to the public; run by financial institutions.

Public sector funds These funds are generally open to Commonwealth, state and territory government employees. They may offer defined benefit funds and constitutionally protected funds (CPFs) to its members.

Self-managed super funds

Open only to you and up to three other people.

Who controls your superannuation?
Trustees run your fund. By law, they must act honestly and prudently, and make decisions in the best interests of all members. Trustees hold office under the fund's rules. Often, trustees hire professionals to invest the fund's money and to look after fund assets, membership records and other tasks. Trustees still remain responsible, and if they fail in their duties, courts or government agencies can remove them.

Who regulates the funds?
Three government agencies regulate and enforce legal standards to protect you and your benefits:

  • Australian Securities and Investments Commission (ASIC) regulates what funds tell you and how they abide by company law
  • the Australian Prudential Regulation Authority (APRA) regulates how funds operate (except self-managed ones) so that they can meet their obligations to you
  • the ATO regulates self-managed funds, employer contributions (the superannuation guarantee), co-contributions and superannuation tax rules.

Government agencies don't guarantee your fund's capital or investment earnings.

How many superannuation accounts do you already have?
If you regularly take on casual work with different employers, you probably have superannuation invested with a few different funds. Rolling your superannuation into one account may be a good idea, because it can reduce the fees and charges you have to pay. (Before you roll over any superannuation, remember to check whether you will be charged a fee for leaving your old fund, and whether you will lose any insurance benefits.)

If you are starting a new job, and you're eligible for superannuation choice, consider choosing a fund to which you already belong, if you are happy with this fund and it suits your needs.

For more information on Superannuation see https://www.moneysmart.gov.au/superannuation-and-retirement