Links to Super Funds & Other Resources

Superannuation, also called Super, is a retirement program where money comes from contributions made by the employers based on a proportion of an employee’s salaries and wages into a superannuation fund. Ideally, this topped up by your money, and additional money may be added through co-contributions from the government.

Here are some direct links where you get to choose the super fund that you like:

Super can be considered as a beneficial lifetime investment – these contributions add up while you are working since it is also invested by your super fund. Your super funds also invest money in other things such as shares, property and managed funds.

Your employer is required by law to pay 9% of your salary, which is called the Super Guarantee. The super guarantee ensures that the minimum contribution is 9% of your ordinary time earnings, up to the ‘maximum contribution base’. Thus it is not payable on overtime rates, but payable on remunerations such as bonuses, commissions, shift loading and casual loadings. This guarantee also entitles you to choose the fund your super is paid into.

There are cases when the employer chooses a ‘default’ fund a super is paid into, one that is nominated under an industrial award. But you can choose your super fund by filling in a Standard choice form from the Australian Taxation Office or from your employer. The choice of superannuation funds allows you to:

  • change funds when your current fund is not available with a new employer;
  • consolidate superannuation accounts to cut costs and paperwork;
  • change to a lower-fee and/or better service superannuation fund;
  • change to a better performing superannuation fund.

There are currently around 500,000 super funds in Australia. The main types of super funds are:

  • Industry funds. These are run by employer associations and/or unions.
  • Wholesale master trusts. These are run by financial institutions for groups of employees and are also classified as retails funds by APRA.
  • Retail master trusts/wrap platforms. These are run by financial institutions for individuals.
  • Employer stand-alone funds. There are established by employers for their employees with a trust structure not necessarily shared by other employers.
  • Self managed superannuation funds (SMSFs or Do-It-Yourself Funds). These are established for a small number of individuals and regulated by the Australian Taxation Office.
  • Small APRA Funds. These are not similar to SMSFs in such that the Trustee is an Approved Trustee, and the funds are regulated by APRA.
  • Public sector employees’ funds. These are established by governments for their employees.

As mentioned above, money can be added through co-contributions from the government when you are eligible. You can also make your own contributions such as an arrangement to sacrifice a larger part of your salary to grow your super. The amount of tax on your contribution will depend on whether they are concessional (before tax), non-concessional (after tax), and whether contribution caps have already been exceeded.

Generally, super benefits fall under three (3) categories:

  • Preserved benefits. These benefits can only be accessed once you reach the age of 55, also called ‘preservation age’. All contributions made after 1 July 1999 fall into this category.
  • Restricted non-preserved benefits. This can only be accessed when you meet a condition of release, such as termination of employment in an employer superannuation scheme.
  • Unrestricted non-preserved benefits. These can be accessed upon your request as long as you satisfy a condition of release.

Once you have reached your preservation age, you may be able to reduce your working hours without reducing your income. This is under the transition to retirement rules and according to the Australian Taxation Office this can be done by “topping up your part-time income with a regular ‘income stream’ from your super savings.” With the new rules, you can take out some or your entire super over into a retirement income stream. You can then increase your reduced income by drawing on your super.

Your preservation age is when you are allowed to access your super benefits. Once you’ve reached your preservation age, you can access your super benefits without having to retire from your work. But you must keep in mind that your preservation age depends on your date of birth.

Many Australians can take out life insurance policies through their superannuation fund. The premiums are offset against your contributions so your afetr tax income does not fall. You can still set who will be the beneficiaries as well as all of the other perks. Options like this do not exist for trauma and income protection insurance policies.

Date of Birth

Preservation Age

Before 1 July 1960

55

1 July 1960 – 30 June 1961

56

1 July 1961 – 30 June 1962

57

1 July 1962 – 30 June 1963

58

1 July 1963 – 30 June 1964

59

After 30 June 1964

60

There is a list of Registrable Superannuation Entities (RSE) and RSE Licensees available to the public. These are regulated by the Australian Prudential Regulation Authority (APRA). You can check the list here: http://www.apra.gov.au/RSE/Pages/default.aspx#

Many people think that planning for their retirement through superannuation is enough.

However it is important to have the right information at your fingertips in many different areas.

Superannuation Industry Resources and Calculators

Superannuation, also called Super, is a retirement program where money comes from contributions made by the employers based on a proportion of an employee’s salaries and wages into a superannuation fund. Ideally, this topped up by your money, and additional money may be added through co-contributions from the government.

Super can be considered as a beneficial lifetime investment – these contributions add up while you are working since it is also invested by your super fund. Your super funds also invest money in other things such as shares, property and managed funds.

You can compute the amount you need to give with the use of superannuation calculators. These tools use the data you will provide to estimate information that are related to your retirement savings. You can also get data regarding your contribution amount and the monthly rate you need to reach a certain amount.

Superannuation calculators use various formulas to reach a right amount. You only need to input the right values that are needed by the program. These necessary values include the employer’s fees, contribution rate, contribution related to taxes, and gross salary. The information is then summarized by the calculator and it estimates the missing data through complex formulas. Superannuation calculators can even check the target age in which you plan to retire.

Added information will be needed if you have given your contribution before you have even used the superannuation calculator. Other assets will need to be provided that the calculator will use to compute the total amount. Some calculators will even ask for co-contribution details if eligible. You must also provide the assumed investment return percentage per annum. This is very important in order to get the correct value for each computation.

Many websites have their own superannuation calculators. These calculators will tell you if you need to cut down the amount you give for superannuation or will inform you if you need to give extra contributions to reach a target amount.  You can check these websites on the internet. You can also go to these sites:

In superannuation, your employer is required by law to pay 9% of your salary, which is called the Super Guarantee. The super guarantee ensures that the minimum contribution is 9% of your ordinary time earnings, up to the ‘maximum contribution base’. Thus it is not payable on overtime rates, but payable on remunerations such as bonuses, commissions, shift loading and casual loadings. This guarantee also entitles you to choose the fund your super is paid into.

There are cases when the employer chooses a ‘default’ fund a super is paid into, one that is nominated under an industrial award. But you can choose your super fund by filling in a Standard choice form from the Australian Taxation Office or from your employer. The choice of superannuation funds allows you to:

  • change funds when your current fund is not available with a new employer;
  • consolidate superannuation accounts to cut costs and paperwork;
  • change to a lower-fee and/or better service superannuation fund;
  • change to a better performing superannuation fund.

There are currently around 500,000 super funds in Australia. The main types of super funds are:

  • Industry funds. These are run by employer associations and/or unions.
  • Wholesale master trusts. These are run by financial institutions for groups of employees and are also classified as retails funds by APRA.
  • Retail master trusts/wrap platforms. These are run by financial institutions for individuals.
  • Employer stand-alone funds. There are established by employers for their employees with a trust structure not necessarily shared by other employers.
  • Self managed superannuation funds (SMSFs or Do-It-Yourself Funds). These are established for a small number of individuals and regulated by the Australian Taxation Office.
  • Small APRA Funds. These are not similar to SMSFs in such that the Trustee is an Approved Trustee, and the funds are regulated by APRA.
  • Public sector employees’ funds. These are established by governments for their employees.

As mentioned above, money can be added through co-contributions from the government when you are eligible. You can also make your own contributions such as an arrangement to sacrifice a larger part of your salary to grow your super. The amount of tax on your contribution will depend on whether they are concessional (before tax), non-concessional (after tax), and whether contribution caps have already been exceeded.

Generally, super benefits fall under three (3) categories:

  • Preserved benefits. These benefits can only be accessed once you reach the age of 55, also called ‘preservation age’. All contributions made after 1 July 1999 fall into this category.
  • Restricted non-preserved benefits. This can only be accessed when you meet a condition of release, such as termination of employment in an employer superannuation scheme.
  • Unrestricted non-preserved benefits. These can be accessed upon your request as long as you satisfy a condition of release.

Your preservation age is when you are allowed to access your super benefits. Once you’ve reached your preservation age, you can access your super benefits without having to retire from your work. But you must keep in mind that your preservation age depends on your date of birth.

Date of Birth

Preservation Age

Before 1 July 1960

55

1 July 1960 – 30 June 1961

56

1 July 1961 – 30 June 1962

57

1 July 1962 – 30 June 1963

58

1 July 1963 – 30 June 1964

59

After 30 June 1964

60

Background on the History of Superannuation in Australia

Superannuation, also called Super, is a retirement program where money comes from contributions made by the employers based on a proportion of an employee’s salaries and wages into a superannuation fund. Ideally, this topped up by your money, and additional money may be added through co-contributions from the government.

Super can be considered as a beneficial lifetime investment – these contributions add up while you are working since it is also invested by your super fund. Your super funds also invest money in other things such as shares, property and managed funds.

Superannuation was first introduced in 1900 as a means tested age pension of £26 a year, which was founded out of general revenue. Eventually, Victoria and Queensland followed suit. In 1908, the Deakin Government passed the Invalid and Old Age Pensions Act 1908 which allowed for a rate of £26 per year. The eligibility, however, was limited to character, race, age, residency and means. This act commenced the following year.

In 1915, the Income Tax Assessment Act 1915 provided for tax deductibility of employer contributions and the exemption of superannuation fund earnings from taxation. But the Bruce Government established a Royal Commission to examine the possibility of having a comprehensive national insurance scheme for retirees, sick and disabled people.

In 1945, the Chifley Government introduced an additional levy on personal income tax which was credited to the National Welfare Fund. However, this fund was abolished in 1985.

By the late 1960s, only about 70% of people qualified for pension based on age. A couple of years later, only 32% of the entire workforce were covered by superannuation according to a survey conducted by the Australian Bureau of Statistics. The Hancock Inquiry then recommended a partially contributory, universal pension system with an earnings-related supplement in 1976. However, the Fraser Government rejected the recommendation of the Inquiry and pension was made to increase subject to twice yearly increases.

In 1983, the Hawke Labor Government supported the principles of employee superannuation. This led to the May Economic Statement to begin a process of reform of the taxation of superannuation. This meant that for lump sums at age 55 or older, 15% would be taxed at the first $50,000. While 30% was taxed for lump sums taken below the age of 55. Industry funds were then established and age pension test was reintroduced with the exclusion of family home.

In 1986, the National Wage Case established guidelines that will require industry super schemes to conform to Commonwealth operational standards and teh Insurance and Superannuation Commision was established to regulate the industry.

In 1989, the Government established a policy based on the “twin pillars” of the age pension and private superannuation thereby rejecting a National Superannuation Scheme. A few years later,the Superannuation Guarantee was introduced and employers are then required to make super contributions on behalf of their employees.

Limited access to superannuation was made possible in 1997 to members who are in severe financial hardship. The Pension Bonus was also introduced, allowing a person to accrue a pension bonus payment by deferring claiming the pension while still working. In 2002, temporary residents who are leaving Australia may be able to withdraw their accumulated superannuation benefits before their preservation age. The government co-contribution for low/middle income earners was also introduced.

In 2005, the Transition to Retirement Pensions was made available. Any member may then start receiving a transition to retirement pension without having to leave the workforce. During this time, the option to choose a Super Fund was also established.

There are currently around 500,000 super funds in Australia. The main types of super funds are:

  • Industry funds. These are run by employer associations and/or unions.
  • Wholesale master trusts. These are run by financial institutions for groups of employees and are also classified as retails funds by APRA.
  • Retail master trusts/wrap platforms. These are run by financial institutions for individuals.
  • Employer stand-alone funds. There are established by employers for their employees with a trust structure not necessarily shared by other employers.
  • Self managed superannuation funds (SMSFs or Do-It-Yourself Funds). These are established for a small number of individuals and regulated by the Australian Taxation Office.
  • Small APRA Funds. These are not similar to SMSFs in such that the Trustee is an Approved Trustee, and the funds are regulated by APRA.
  • Public sector employees’ funds. These are established by governments for their employees.

For more information about the history of Superannuation, you can visit this website: http://www.aph.gov.au/library/pubs/bn/2008-09/Chron_Superannuation.htm

There is a list of Registrable Superannuation Entities (RSE) and RSE Licensees available to the public. These are regulated by the Australian Prudential Regulation Authority (APRA). You can check the list here: http://www.apra.gov.au/RSE/Pages/default.aspx#

Sources:

https://www.amp.com.au/wps/portal/au/AMPAUCategory3C?vigurl=%2Fvgn-ext-templating%2Fv%2Findex.jsp%3Fvgnextoid%3D5910ae205f711210VgnVCM10000081c0a8c0RCRD

How Does Superannuation Work

Superannuation, also called Super, is a retirement program where money comes from contributions made by the employers based on a proportion of an employee’s salaries and wages into a superannuation fund. Ideally, this topped up by your money, and additional money may be added through co-contributions from the government.

Super can be considered as a beneficial lifetime investment – these contributions add up while you are working since it is also invested by your super fund. Your super funds also invest money in other things such as shares, property and managed funds.

Superannuation works when your employer pays an amount that’s equal to a minimum of 9% of your ‘ordinary time earnings’ into a super fund. This super fund may be of your own choosing or was chosen for you by your employer. This amount comes out of your pre-tax earnings under the superannuation guarantee.

For example, if your ordinary time earnings for a year is worth a total of $70,000, then the formula is:

$70,000 x 9% = $6,300 for the year or $525 per month. The super guarantee is $6,300.

There will be a lot of fees and other charges on your superannuation statements in order to manage and grow your super balance. The super fund will then invest the money to maximise the return for the associated risk profile that you have specified.

However, employers will not have to pay the super guarantee in certain circumstances, such as:

  • Employees are earning less than $450 per month
  • Employees under the age of 18 who work 30 hours a week or less
  • Employees over the age of 70
  • Anyone who are paid to do domestic or private work for 30 hours a week or less

Super works by lowering tax rates on contributions and investment earnings thereby making super a tax efficient way to save for retirement, it supplements any Centrelink benefits that you may be entitled to upon retirement, it assists low-middle income earners, and it offers low cost Death and Total and Permanent Disablement insurance cover during your entire working life.

If you are under the age of 65, you can make contributions by direct debit, BPay, cheque or payroll deduction. If you fall under the age range of 65-74, you can make contributions if you have been gainfully employed at least 40 hours over 30 consecutive days during the same financial year in which the contributions are made. However, you can no longer make contributions to your super once you reach the age of 75.

There are cases when the employer chooses a ‘default’ fund a super is paid into, one that is nominated under an industrial award. But you can choose your super fund by filling in a Standard choice form from the Australian Taxation Office or from your employer. The choice of superannuation funds allows you to:

  • Change funds when your current fund is not available with a new employer
  • Consolidate superannuation accounts to cut costs and paperwork
  • Change to a lower-fee and/or better service superannuation fund
  • Change to a better performing superannuation fund

Once you have reached your preservation age, you may be able to reduce your working hours without reducing your income. This is under the transition to retirement rules and according to the Australian Taxation Office this can be done by “topping up your part-time income with a regular ‘income stream’ from your super savings.” With the new rules, you can take out some or your entire super over into a retirement income stream. You can then increase your reduced income by drawing on your super.

Your preservation age is when you are allowed to access your super benefits. Once you’ve reached your preservation age, you can access your super benefits without having to retire from your work. But you must keep in mind that your preservation age depends on your date of birth.

Date of Birth

Preservation Age

Before 1 July 1960

55

1 July 1960 – 30 June 1961

56

1 July 1961 – 30 June 1962

57

1 July 1962 – 30 June 1963

58

1 July 1963 – 30 June 1964

59

After 30 June 1964

60

 

For more information about the transition to retirement, preservation age and tax on transition to retirement income streams, you can check this link: http://www.ato.gov.au/individuals/content.aspx?doc=/content/74219.htm&pc=001/002/064/007/002&mnu=0&mfp=&st=&cy=

There is a list of Registrable Superannuation Entities (RSE) and RSE Licensees available to the public. These are regulated by the Australian Prudential Regulation Authority (APRA). You can check the list here: http://www.apra.gov.au/RSE/Pages/default.aspx#

Sources:

http://www.theadvicefactory.com.au/2009/01/how-does-superannuation-work.html

Guide to Superannuation

Superannuation funds are a great way to invest for your retirement since it can allow you to save gradually until you retire. These funds work in a similar way as life insurance policies or pension funds. It is a scheme constructed to encourage individuals to save for their own retirement as a solution to the increasing amount of workers that haven’t saved enough for their old age and the decreasing power of the State to spend for pensions.

One can join a superannuation fund in the place where they are employed. Meanwhile, you can also decide to join and contribute to a self managed superannuation fund or Do-it-yourself (DIY) funds. DIY funds are established for a small group of people which is usually less than 5. These groups are monitored by the Australian Tax Office. It is a trust fund, and being such, the fund members or contributors are its trustees which has the responsibility for the operation of their funds and in constructing and implementing an investment strategy. The money accumulated from its members will be for the sole purpose of providing for the retirement benefits of its members and not for the personal use of any of its members. This superfund is governed by super laws and the trust deed which is a legal paper that sets out rules for creating and operating the fund. The trust deed in this fund will specify the following:

  • When contributions are allowed
  • Availing of benefits
  • Appointment of professional advisers like an auditor
  • Winding up procedures
  • The powers, duties and responsibilities of the fund’s trustees
  • The rights of the members
  • The fund’s objectives
  • Who the trustees are
  • Qualifications of a trustee
  • Manner of appointment and removal of trustees
  • Qualifications of members

This kind of superannuation is an arrangement which requires an enormous amount of time and investment skill to manage and operate profitably. The one who would lead setting up this kind of fund must be prepared to follow strict requirements stated in super laws. It is highly advisable to seek expert advice when setting up this superfund.

All kinds of superannuation funds are entitled to tax benefits such as lower income tax rate and other allowable deductions to contributions made. These funds also enjoy government benefits which even provide total permanent disability and insurance coverage for its trustees.

In general, it can be said that anyone can join a superfund even though you are not employed or you have a low income. If you don’t have a job or not earning enough, your spouse can contribute for you until you reach your retirement. Self-employed individuals can also join a super fund and claim a full tax deduction for every contribution made.

Since saving for the future is really important, you should not touch your super fund, and you are not supposed to even try to touch them until you are retired, or too ill to work. But, if you want access to all your access which includes your superannuation fund, you must need to understand the terms and conditions in a super fund. The terms and conditions in a superfund differ from one fund to another but they follow some similar basics such as:

  1. The preservation of age is the minimum age requirement before you can begin to access your superfund. The preservation of age differs from the year you were born. For those born after 1960, the preservation age is 60, if you were born before this year, you can check with your fund manager or the Australian Tax Office for more details.
  2. The benefits that you would want to access may be governed with a set of rules that determines when and how they should be released. The rules differ according to category: Preserved, Restricted non-preserved and unrestricted non-preserved. With this, you need to know what kind of benefits you want to release.  The hardest to access are the preserved benefits. The benefits that can be released as long as your employer has paid your contributions and you’re terminated from your job are restricted non-preserved benefits. Meanwhile, the unrestricted non-preserved benefits are yours to spend whenever you want.

Finally, there are other important principles in a Super Fund. These will supplement all the knowledge you gathered from what was discussed earlier. It is always important to remember these:

  • Your employer must contribute money to your super fund account on your behalf in compliance to superannuation guarantee laws.
  • The contributions made by your employer and any concessional contributions you choose to make are taxed at a minimum rate of 15% when the contributions enter the super fund.
  • If you make an after-tax contribution to your superfund, the government may put some tax-free money into your super fund depending on your level of income.
  • The money you earn from your super fund investment is taxed no more than 15%.
  • You will pay penalty tax if you make a super contribution exceeding the caps each year.
  • You are free to choose the super fund you want. If you don’t choose, your employer chooses for you.
  • Your fund must send you regular reports on its performance.

When you retire on or after the age of 60, you pay no tax on your superfund benefits, unless you serve as a long-term public servant.