Superannuation, sometimes referred to as just “super”, is the most commonplace method for building a retirement fund in Australia. Unfortunately, this is all a lot of people know about it! If you’re a recent expat to Australia or you’ve lived there all your life and you’re still a little confused, learning about superannuation can is very important. Here’s some of the basic things you need to know.
We’ll start off with the most basic question: what is superannuation?
In the simplest terms possible, superannuation is money which your employer sets aside throughout your time working for them, which you can then live on once you reach retirement age. The more you save, the more you’ll be able to tap into once you retire from work. The more you save, the more you’ll be able to tap into once you retire from work. That should clear up some questions if you were wondering if superannuation is a good idea or not. As with a lot of retirement schemes, you can only withdraw money from your superannuation pot when certain criteria are met, for example, when you turn 65.
So, how do you save for a superannuation?
For the large majority of people, the answer is very simple: get a job and keep it. It’s your employer’s responsibility to pay instalments, called “contributions” into a designated superannuation account for you. This obligation is sometimes called a “super guarantee”. These contributions are on top of your wages, and there are various laws dictating how much money your employer has to put towards the fund. If you’re 18 years old or over, and get paid $450 or more pre-tax per month, then your employer must pay superannuation contributions. People who are under 18 and are being paid the same amount per month, as well as working more than 30 hours per week, will also be entitled to superannuation contributions. These regulations apply whether you’re an Australian citizen or not, whether you work casual, full-time or part-time worker. There are also various different plans you can use such as NSF Super, which can affect your account’s interest rates.
So, how is money paid into this fund?
Since 2014, Australian employers have been required to pay 9.5% of an employee’s regular time earnings into their superannuation account. This is expected to rise over the next few years. When the law says “ordinary time earnings”, it basically means whatever you earn from your ordinary working hours, which includes over-award payments, allowances, bonuses, and some paid leave. Unfortunately, overtime hours generally aren’t included in the definition of “ordinary time earnings”. Aside from that, you can manually choose to put your own money into your superannuation account, and the Australian government will occasionally put money in as well. The definitions and conditions of this may change over time, so be sure to watch the news!
If you were confused about what superannuation meant for you, then I hope this post has cleared it up. If your not so up to speed then perhaps a specialist organisation like Camori Investments can help you get on track.
***Images thanks to 401kcalculator.org***