MONEY GOES IN
Employer and personal contributions
YOUR SUPER IS INVESTED
Your money is invested in assets such as shares, property and fixed interest
YOU USE IT IN RETIREMENT
Your super can help provide income once you retire
What Is Superannuation?
What Is Superannuation?
In simple terms:
Superannuation, or super, is money set aside and invested during your working life to help provide income when you retire. Superannuation is designed to help you build savings for retirement.
Where Does Your Super Money Come From?
For most Australians, super starts with contributions made by your employer. You can also make additional contributions yourself.
EMPLOYER CONTRIBUTIONS
Your employer generally contributes a percentage of your ordinary time earnings to super.
PERSONAL CONTRIBUTIONS
You can choose to contribute some of your own money to super.
SALARY SACRIFICE
You may be able to arrange for part of your before-tax salary to be contributed to super.
How Much Super Does Your Employer Pay?
The Super Guarantee rate is 12%. This means eligible employees generally receive employer super contributions equal to 12% of their ordinary time earnings.
$100,000
Ordinary Time Earnings
× 12%
Super Guarantee
= $12,000
Employer Super Contribution
This is generally paid in addition to your salary, although the way your remuneration package is structured can affect how it is presented.
How Is Your Superannuation Invested?
Your super doesn’t simply sit in a bank account. Super funds generally invest your money across different types of assets with the aim of growing your retirement savings over time.
Shares
Australian and international companies.
Property
Direct or indirect investments in property.
Fixed Interest
Investments such as government and corporate bonds.
Cash
Cash and short-term investments with generally lower risk and return.
The mix of investments you choose can have a significant impact on how your super grows over the long term.
Does Your Super Balance Go Up and Down?
Yes. Because your super is invested, its value will move as investment markets rise and fall.
Growth-focused investment options generally have more exposure to assets such as shares and property. This can provide greater potential for long-term growth, but also means larger movements in value along the way.
More conservative options generally have greater exposure to defensive assets such as cash and fixed interest, which can reduce volatility but may also provide lower long-term returns.
For most people, super is a long-term investment, so the investment strategy should reflect how long you have until retirement and how much investment risk is appropriate for you.
When Can You Access Your Super?
Super is designed to fund your retirement, so you generally can’t access it whenever you want. You usually need to meet a condition of release before you can withdraw your super.
Reach Preservation Age & Retire
Depending on when you were born, you may be able to access your super after reaching preservation age and retiring.
Turn 65
Once you turn 65, you can generally access your super even if you’re still working.
Other Circumstances
There are limited circumstances where super may be accessed earlier, such as certain financial hardship, compassionate or medical grounds.
For anyone born from 1 July 1964, preservation age is 60.
Is Superannuation Taxed?
Super has its own tax rules and, for many people, the tax rates within super can be lower than the tax rates that apply to income and investments held personally.
Contributions
Concessional contributions are generally taxed at 15% when they enter the fund.
Investment Earnings
Investment earnings in the accumulation phase are generally taxed at up to 15%, with different treatment applying to capital gains.
Retirement
Once super is moved into retirement phase, investment earnings on assets supporting a retirement phase income stream can generally be tax-free, subject to the applicable limits and rules.
These tax concessions are one of the reasons super can be an effective way to build wealth for retirement.
Can You Put Extra Money Into Super?
Yes. In addition to employer contributions, you may be able to make extra contributions to super to help build your retirement savings.
Salary Sacrifice
Arrange for some of your before-tax salary to be contributed directly to super.
Personal Deductible Contributions
Make a personal contribution and, if eligible, claim a tax deduction.
After-Tax Contributions
Contribute money from your savings or other after-tax money into super.
Contribution limits and eligibility rules apply, so it’s important to understand the relevant caps before making larger contributions.
How Much Super Do You Need?
There isn’t one super balance that everyone needs for retirement. How much you need depends on the lifestyle you want, when you retire, how long your money needs to last and what other assets and income you have.
Your Retirement Lifestyle
How much income you want to spend each year.
When You Retire
Retiring earlier generally means your savings need to support you for longer.
Other Assets & Income
Investments, cash, your home and potential Age Pension entitlements can all affect the amount you need from super.
Investment Returns
How your super is invested can have a significant impact on how long your retirement savings last.
The better question isn’t simply “How much super should I have?” It’s “Will my super and other assets support the retirement I want?”
Is Your Super Working Hard Enough?
Having super is only the starting point. Over a working lifetime, the fund you use, the fees you pay, how your money is invested and how much you contribute can all affect your eventual retirement balance.
Investment Strategy
Is your investment option appropriate for your timeframe and attitude to risk?
Fees
What are you paying for administration, investment management and other costs?
Contributions
Are you making the most of the contribution opportunities available to you?
Insurance
Does your super include insurance, and is the cover appropriate for your needs?
Small differences in how your super is managed can compound over many years, so it can be worth reviewing rather than simply leaving it on autopilot.
Superannuation Is Only Part of the Picture
Super can be one of your largest assets by the time you retire, but it shouldn’t be considered in isolation.
Your super, investments, home loan, cash flow, tax position and retirement goals can all influence the decisions you make along the way.
The goal isn’t simply to build the biggest super balance possible. It’s to make sure your money is structured to support the life and retirement you want.
Where Does This Fit Into Your Financial Strategy?
Superannuation is an important part of building wealth for retirement, but it is only one part of your overall financial position. How much you contribute, how your super is invested and how it works alongside your other assets can all affect your longer-term financial outcomes.
We warmly welcome new clients and our door is always open.
Let us take the stress and hassle out of managing your financial goals so you can focus on the important stuff.