In January 2009, we launched the SuperGuide website, and since that time we have received thousands of questions on different aspects of superannuation. We try to represent as many questions as possible in the articles we publish, while also ensuring that we cater for those readers who are just beginning their superannuation education.
The Top 10 must-know facts listed below are a handy guide for those seeking to understand how super works, and the list also serves as a refresher for those readers who may be more familiar with the super rules. You can find more information about each of the super rules outlined below by using the search function (see top right-hand side of website) on the SuperGuide website.
Top 10 must-know super rules
1. Superannuation guarantee. Your employer must contribute money to your member account in a super fund on your behalf. This obligation is imposed on employers under the superannuation guarantee (SG) laws. Compulsory employer contributions are often called SG contributions.
2. Tax on concessional (before-tax) contributions. Your employer’s compulsory SG contributions and any before-tax contributions that you choose to make (known as concessional contributions) are taxed at a maximum rate of 15 per cent when the super contributions enter the super fund. In comparison, a person earning $37 000 a year or more can expect to pay at least 30 per cent
3. Special tax rate on
4. Co-contribution. If you make non-concessional (after-tax) contributions to your super fund, depending on your level of income, the government may put some tax-free money into your super fund for you. This is known as the co-contribution.
5. Contributions caps. The amount of super contributions that you can make each year is capped, unless you are happy paying extra tax. If you make super contributions that exceed the caps you will have to pay
6.
7. Investment choice. In most cases you can decide how you want your money invested by the super fund. by choosing from your super fund’s investment options. If you don’t make an investment choice, then your super money is invested in a default investment option. The default option is typically invested in range of assets, known as a balanced investment option, although some super funds call the default option, a growth option. Investments are spread across higher risk and lower risk assets as a means of maximising investment returns while managing the risk that some investments may lose money.
8. Member reporting. Your super fund must send you regular reports (at least annually) on the fund’s performance, and on your own super account’s performance. Your super fund must also state fees charged, and show you any other transactions on your super account (such as the deductions for
9. Preservation. Your money is preserved in super. That means you generally can’t take your money (your benefits) out of the super fund until you retire at or after your preservation age (from age 55 to 60, depending on your date of birth), or when you satisfy another condition of release. To be allowed to withdraw your super you must, in super’s technical language, satisfy a condition of release and these conditions are very specific (see ‘Accessing super’ tab at the top of the SuperGuide website).
10. Tax-free for over-60s. When you retire on after the age of 60, you pay no tax on your superannuation benefits, unless you’re a long-term public servant. And there’s more! When you receive a pension (which super funds may also call an income stream) from your super fund, the earnings on the assets that finance your pension are also exempt from tax, even when you retire before the age of 60 (see ‘Super & tax’ tab at the top of the SuperGuide website).
