Superannuation: What is it?

How do I pay superannuation? |  How do I choose a fund? |  When can I get my superannuation? |  I'm on WorkCover. Do I still get super contributions? |  Temporary residents and super |  I've lost my super... where is it? | BONUS VIDEOS

Superannuation is an investment of your money, and is designed to help you save for retirement. Money put aside from your salary gets invested into a fund during your working life which you then access upon retirement, or reaching a certain age or another trigger.

The idea is that over many years the fund grows through investing your money, and builds up value to a point that allows you to live in financial security in retirement.

Super plays a huge role in ensuring Australians are able to enjoy their retirement without relying upon social welfare. It is also taxed at a lower rate than other investments or salary, so the system is designed to entice you to save for your own retirement since you'll get a better after-tax return.Some super funds offer additional benefits, such as life insurance cover, and total and permanent disability insurance.

In this case it is 'super' because it comes to your rescue in your later years.

How do I pay it?
Money can find its way into your fund in four ways: from your employer, from you, by government co-contribution, and from rollovers from your other super funds.

Generally, if you are aged 18 or older and earn $450 or more in a month, your employer must pay superannuation into a superannuation account for you. However, if you earn less than the $450 a month, or if you work for less than 30 hours a week, and your work is of a domestic or private nature, your employer is not required to pay superannuation for you.

The Australian government guarantees a minimum of 9% of super contributions from your employer – known as the 'superannuation guarantee' (SG). This requirement is set out in the superannuation legislation that employers must adhere to, and covers full-time, part-time and casual employees.

• the SG rate will gradually increase from 9% to 12% between July 1, 2013 and July 1, 2019, and
• the SG age limit will be abolished from July 1, 2013.

This money comes from your employer directly, and not from your pay packet (although total remuneration can be quoted inclusive of the superannuation amounts, so you should check).

However, you are able to put extra money in to your superannuation yourself (see salary sacrificing, and co-contributions to find out more), although there are contribution caps regulating the maximum amount you can put in without being hit with penalty tax. Your money then gets invested by the fund on your behalf, and is yours to use when you retire (or meet another condition that allows you to access your money).

How do I choose a fund?
Your super money can only go into a fund which is regulated by legislation. Private sector employees have 'choice of fund', which basically means you can choose the fund into which your superannuation money is invested.

Usually, when you start a new job your employer will provide you with a standard choice form, as well as documentation for the super scheme which is the employer's default fund. If you don't nominate a fund, the SG contribution will automatically go into the default account under your name. Note also that since July 1, 2008, an employer default fund must provide minimum life insurance cover.

If you already have a fund, you simply notify your employer of your superannuation details on the standard choice form. It is worth shopping around and researching superannuation products to find which fund will best suit you. The government's website MoneySmart is a good starting point for your research.

Show me the money! When can I get my superannuation?
As your superannuation is meant to be for your retirement, you generally you cannot get access to your fund until you reach preservation age and retire or reach age 65.

There are some exceptions regarding personal circumstances – if you have a terminal illness or injury you may be entitled to access your super as a tax-free lump sum payment, but this will need to be organised through your super fund as it is their decision, and has to meet the conditions in the superannuation law as well. Find out more about superannuation and retirement here.

I'm on WorkCover. Do I still get super contributions?
There may no obligation for the boss to keep contributing to your super fund while you are away from work on WorkCover. The obligation to contribute to super only applies to wages and salary that you receive while actually working.

Under some awards, workplace agreements or contracts, some employers are obliged to continue super contributions for a limited period while a claimant is on WorkCover. So it will pay to check.

Yes, they do have super contributions paid on their behalf, and yes, they can take it with them. If you are a temporary resident and would like to find out more about claiming your super back, see Departing Australia with your super.

I think I have lost part of my superannuation somewhere, is there some way of finding it and getting it back?
Yes, there are ways of tracking down and claiming lost super. See Find your lost super to find out more.

BONUS VIDEOS
The ATO has produced a series of videos, tracking changes that are likely to be required for superannuation, depending on the age group one finds oneself in. Below is the video for over 50s, however all the videos (for under 20s to over 60s) can be viewed here.

Last reviewed 14/3/2013

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