What is Super?
Superannuation, or super, is important because the more you save, the more money you will have in retirement. Super is a long-term investment that grows over time. It is intended to support you when you retire.
Generally, you’re entitled to super guarantee contributions from an employer if you’re both:
- 18 years old or over, and
- paid $450 or more (before tax) in a month.
It doesn’t matter whether you’re full-time, part-time or casual, or if you’re a temporary resident of Australia.
If you’re under 18 years old, you must meet the above conditions and work more than 30 hours per week to be entitled to super contributions.
For most people, super begins when you start work, and your employer starts paying a percentage of your salary or wages into a super fund account for you. Currently, the legal requirement for employers is to contribute 10% of your income to your super.
The earlier you learn about what you are entitled to, what your employer needs to pay, and the limits that apply, the better off you will be when you retire.
You should provide your tax file number (TFN) to your employer and your super fund. If you don’t, your super fund may take extra tax out of your super contributions and will not be able to accept any non-employer contributions. If you are starting a new job from 1 November 2021 and don’t choose a super fund, your employer may contact the Tax Office to request details of an existing super account to pay your super into (known as a stapled super fund). If you have not chosen and do not have a stapled super fund, your employer will contribute to their nominated default fund for you.
If you do not want your super paid into the stapled super fund that the ATO provides to your employer, you will need to complete a new Superannuation standard choice form and give this to your employer. Your super fund invests and manages this money for you until you retire.
To download the Superannuation form, please visit the ATO’s website (www.ato.gov.au), search the term, “Superannuation standard choice form“, and click on this page where you can download the PDF form.
At different times in your life, there are important decisions you can make that will greatly impact your retirement savings. From choosing the right fund to managing the number of funds you have and increasing the amount you put away, these are all decisions you can make to maximise your super.
Adding a little extra yourself, choosing a fund whose investment strategies align with your circumstances and checking how much you are paying in fees and charges will help your super grow better over your whole working life. You can add to your super by entering into a salary sacrifice arrangement with your employer, making personal super contributions, transferring super from foreign super funds, or you may be eligible for government contributions. There are limits on how much you can contribute to your super each year.
Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.
One example of a salary sacrifice arrangement is having some of your salary or wages paid into your super fund instead of to you. This is not generally classed as a fringe benefit and has the effect of reducing your taxable income.
If you’re a contractor or a temporary resident working in Australia, you may also be entitled to super.
If you’re self-employed, you can choose to contribute super for yourself. You can select a fund and make contributions to it on a regular basis or when it suits your situation.
When you change jobs, if eligible, you will again be given the option to choose your own super fund. This is an excellent time to review your current super fund and consider whether you are happy with its fees, fund performance and investment strategies.
Generally, you can only withdraw your super when you reach retirement.
You can withdraw your super:
- when you turn 65 (even if you haven’t retired),
- when you reach preservation age and retire, or
- under the transition to retirement rules while continuing to work.
Your preservation age is not the same as your pension age. Your preservation age is the age at which you can access your super if you are retired (or have started a transition to a retirement income stream).
There are limited circumstances where you can legally withdraw your super early, such as:
- specific medical conditions,
- if you are experiencing severe financial hardship.
Super laws provide specific rules for when you can withdraw your super. These are called conditions of release.
Beware of people promoting the early release of super schemes. They might tell you they can help you withdraw your super to pay off credit card debt, buy a house or car, or go on a holiday. These schemes are illegal.
Illegal schemes will cost you a lot more than the super you withdraw and will get you into trouble. There are severe fees and penalties.
When you visit and work in Australia, your employer may be required to make super contributions to a super fund on your behalf.
When you leave Australia, you may be eligible to claim that super back as a Departing Australia Superannuation Payment (DASP). There are requirements you will need to meet to claim your DASP. One essential requirement is that you must still have an active Australian bank account for the money to be paid into.
Your DASP is taxed before you receive it. The DASP tax rate is different for working holiday makers (WHM). If you hold (or held) a 417 (Working Holiday) or 462 (Work and Holiday) visa, you are classified as a WHM.
Should you require any additional assistance please don’t hesitate to contact us.
By Richard Liggins