Super can seem complex but if you know how it works you can make the most of its tax-friendly ‘perks’ to build up enough savings for retirement?
1. What is superannuation?
Superannuation, or super, is Australia’s official retirement savings system. In other countries it is generally referred to as a pension plan, or you may have heard of the US’s 401(k) plan. Your employer contributes money to one of the many funds that have been set up by banks, other financial institutions and specialist investment management companies. You can also make extra contributions of your own. The idea is that when you retire you will have a sum of money to make up for the fact that you are no longer being paid a salary. That amount will include the ongoing contributions from you and/or your employer as well as the earnings made from investing that money.
2. Does my employer have to contribute for me?
If you’re 18 or over and are paid $450 or more (before tax) in a month, your employer should contribute at least 9.5% of your ordinary earnings (ie, your rate before any overtime) into super for you. This is known as the super guarantee (SG). The rate will gradually increase: in 2021 it will go up to 10%, then it will increase by 0.5% each year until July 2025, when it will reach 12%. If you are under 18 you have to work at least 30 hours in a week to get the 9.5% super contribution.
3. I work part-time. Do I still get super?
Yes – it doesn’t matter whether you’re full time, part time or casual as long as you meet the income and age requirements mentioned in question 2.
4. What if my employer isn’t making payments?
Look at your latest statement or contact your fund to check whether super payments have been made. You can also use the “employee superannuation guarantee (SG) calculator tool” on the Australian Tax Office website ato.gov.au to help you work out whether you are eligible for SG contributions and whether your employer is paying the correct amount. If the tool shows that your super has not been correctly paid to your fund by your employer, you can print a summary of the super calculation and take it to your employer and discuss it. If you can’t resolve the issue with your employer, you can use the tool to prepare a super inquiry, which you can lodge electronically with the ATO.
Looking for more? You’ll find all 27 key questions in Money’s 2016 Super Guide, on sale now.