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Superannuation Fact Sheet
BB Fact Sheets – Money – Superannuation
The Basics
Superannuation is a way to invest for your retirement which the Australian Governemnt has made compulsory for all working people. Tax concessions and other government benefits currently make it attractive as a long term investment vehicle. Your savings grow because money is paid in regularly, which your fund invests at low rates of tax. Super funds may also offer insurance cover.
Superannuation can be an effective way to save money for your retirement because of the tax concessions and other government benefits. Superannuation funds may also offer additional benefits, such as life insurance cover, and total and permanent disability insurance (insurance if you become disable or sick for an extended period of time).
In most cases, you join a fund as soon as you're employed (or at least within three months of being employed), because by law your employer must pay contributions into a fund on your behalf if you are eligible for compulsory contributions.
Generally, to be eligible you must be under 70 years of age, working on a full-time, part-time or casual basis and paid over $450 (before tax) per calendar month. If you are under 18 you have to meet the additional requirement of working more than 30 hours a week to be eligible.
If you're self-employed, you can decide if you want to join and contribute to a fund. Most self-employed people can claim a full tax deduction for contributions they make to their super until age 75.
If you are eligible for compulsory contributions, your employer must pay a minimum of your ‘ordinary time earnings’ into your super account each quarter. This means 9% of the amount you earn for your ordinary hours of work. These payments are called 'super guarantee' payments. For example, if your ordinary time earnings for the year are $50,000 your employer must pay $4,500 into your super account.
Baby Boomers and Superannuation
Baby Boomers since the mid 1990’s have learnt about Superannuation funds and the move towards this being a retirement fund in the absence of receiving a government pension.
However, the majority of Baby Boomers reaching the age of retirement may not have large superannuation funds available to them as it has only been operating for under 20 years as a scheme.
Top Tips for Superannuation
There are a range of issues to consider and decisions to make when it comes to your Superannuation. These include:
Choosing a fund
Choosing your investment strategy
Changing funds
What happens if you change your job?
Super and the breakdown of relationships
Getting super befor your ‘preservation age’
What happens to your super if you die?
Self managed funds
You don't have to choose if you don't want to. If you don't, you can do nothing and your employer will pay their contributions into a 'default' fund they choose or which is nominated in an industrial award covering your employment.
Your current fund may be different from the default fund. It is important that you take time to understand the benefits and costs of your employer's default fund. Compare it with at least two other funds, an industry fund and a retail fund.
You can choose a fund at any time, but you cannot make your employer change your fund more than once a year. You must also give your employer written confirmation from your chosen fund that it will accept your employer’s contributions.
Choosing or changing funds for your existing accounts, including previous employer contributions, must be done separately. Generally, it saves time and money in the long run to keep your super in as few accounts as possible.
Disclaimer: The information contained in this section should not be used for individual financial advice. Please seek independent financial advice if you have concerns or specific questions relating to your money.
This article was created by Jennifer Lawrance for babyboomers.com.au - Australia's website for Baby Boomers. Sources include ASIC and the Federal Government. Babyboomers.com.au is an online resource to help people find information and services on health, money, travel and recreation
Copyright 2009 Babyboomers Pty Ltd. All rights Reserved.
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