Q: I never understood the term ‘superannuation’. Is that our money or government money? If it is our money why can’t we do whatever we want with it? Isn’t it illegal to cut our rights when it comes to this matter?
I agree with you that the term ‘superannuation’ is confusing.
If an individual is employed, the employer must make superannuation contributions on the individual’s behalf to a super fund, assuming the employee earns more than $450 a month. If the employer is under the age of 18, then he or she must work at least 30 hours for the month as well, to be eligible for these super contributions. The compulsory employer super contributions are known as Superannuation Guarantee contributions, and that money is the employee’s money but they won’t be able to their hands on it for many years.
This is how Superannuation Guarantee (SG) contributions work: A super account is opened in the employee’s name, and those super contributions and the earnings on those contributions belong to the employee (although the employee cannot withdraw any money from the super account until they reach a certain age).
An individual (including someone receiving SG contributions) can also choose to make voluntary super contributions to a super account. The voluntary contributions (if any) and the earnings on those contributions also belong to the individual, but the money cannot be accessed until a certain age.
The deal with super is: although super is your money, your super account enjoys tax concessions (you pay a maximum tax on investment earnings generated within the super fund of 15%) which means the federal government has imposed special rules that mean you cannot access the money until you retire after a certain age, or you satisfy another condition of release. I explain the conditions of release in the article Accessing super early: 14 legal ways to withdraw your super benefits early.
Note: If a person makes concessional (before-tax) contributions, or the person’s employer makes SG contributions, then those contributions are subject to 15% contributions tax. If an individual earns more than $300,000 a year (or from 1 July 2017, earns more than $250,000), then an additional 15% tax is imposed on super contributions, taking the total tax on concessional contributions to 30%.
For a brief rundown of the super rules in plain language, see SuperGuide article Super for beginners: Top 10 must-know super facts.
For an explanation of some of the more common superannuation terms see SuperGuide article Super for beginners, part 22: How do you speak ‘superannuation’ (… in 20 words)?