Understanding Australian Superannuation
Superannuation, or 'super', is one key way to make sure you have money saved for when you retire. Your employer makes compulsory contributions throughout your working life into a superannuation fund of your choice, helping you build a nest egg for when you'll need it most.
The superannuation system in Australia has gone through many changes since it was first introduced more than 40 years ago, but the purpose remains the same. Making sure you have savings when you retire after a lifetime of working hard.
You can also make voluntary contributions into your superannuation fund, and doing so can have great tax benefits. You have the option of making contributions through salary sacrificing or through making tax deductible superannuation contributions.
Since 1992, employers have had to make a minimum contribution (officially called a "superannuation guarantee (SG) contribution") that currently sits at 9.5% of your wage or salary, and contributions must be made on at least a quarterly basis.
Generally, anyone aged over 18 and earning more than $450/month pre-tax is eligible for superannuation contributions from their employer. This applies whether you work casual, part-time or full-time hours, and if even you are a temporary resident.
There are more than 500 super funds currently operating in Australia and managing more than $2.8 trillion in assets. We strongly recommend you take time to consider which one is right for you. Your employer must always give you the option to nominate which super fund you would like to use, and will choose one for you if you don't express a preference.
If you've worked in more than one job, it's possible you have had contributions paid into more than one super fund. If this is the case, we recommend you consolidate all of your contributions into a single account to maximise the future value and growth potential.
It's a good idea to make sure your super fund has your tax file number, as this will help you to keep track of your payments. You can also keep track of your superannuation through myGov, where you can link to your tax file number to allow you to see the details of all of your super accounts, combine accounts and track down forgotten accounts.
How to grow your super fund
You have the option of adding to your super through salary sacrificing. This means asking your employer to pay a portion of your pre-tax salary into your super account in addition to the compulsory contribution, and this additional portion will be taxed at 15%. This can be a great way to reduce your tax and increase your super. Find out more about salary sacrificing here.
You are now also able to make additional concessional contributions up to your concessional contributions cap of $25,000, and claim an income tax deduction for doing it. Find out more about tax deductible superannuation contributions here.
When can you access your super?
When can you access your super? It all depends on when you were born. If it was before July 1, 1960, then you can access your super once you turn 55. If you were born later, the age varies between 55 and 60. If you are 65 or older, you can access your super and continue to work.
Once you're eligible to access your superannuation, you can withdraw the funds as either an income stream or a lump sum. There are various tax implications for the different forms of super fund withdrawals (which apply equally to residents and non-residents) and we recommend you speak to one of our tax professionals at H&R Block to work out the best choice for you.
How H&R Block can help you
Finding the best way to manage, grow and access your super can be a challenge. The complexities of the system and the endless tax implications can make it hard to work out the best choice for you and your future. But we're here to help.
Disclaimer: The information provided is general in nature, and as such it should not be relied upon for making decisions without seeking expert opinion or personal advice. H&R Block disclaims all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable, for any loss or damage whatsver (including human or computer error, negligent or otherwise, by one or more of the authorities, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the information or advice provided. The user must accept sole responsibility associated with the use of the material in this article, irrespective of the purpose for which such use or results are implied. The information applies the law as stated at the time of writing, and is no substitute for financial advice.
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