Reading time: 4 minutes
There are lots of rules when it comes to our super system. But not every rule applies to you at every age, so it’s worth figuring out which ones have an impact for your age group.
The rules at different ages govern how much and when you can contribute to super, when you can get your hands on your savings and how much tax you will pay. These rules are designed to stop people taking advantage of the generous tax benefits offered as part of Australia’s super system.
To make things a bit easier to understand, here’s SuperGuide’s simple explainer of the super rules applying to you if you’re just starting out in the super system.
Super rules if you’re in your teens
The super system is designed to help you save money for your retirement over your entire working life. It holds money contributed by both you and your employer and will help supplement your income during your retirement years.
The rules that apply to your super when you are aged under 18 years are split between those covering when money goes into your super account (contributions) and when it comes out (withdrawing):
1. Contributing to your super
Superannuation Guarantee (SG)
If you are under 18 and being paid $450 or more (before tax) in a calendar month and work more than 30 hours a week, your employer must pay SG contributions (10.0% in 2021–22) on your behalf into your super account.
Once you meet these conditions, super is payable for all employees, whether you are working full time, part time or are casually employed.
If you don’t meet the eligibility conditions, your employer is not required to make SG contributions for you. Your employer may still choose to make super contributions on your behalf even though they are not legally bound to do so.
If you work in a private or domestic capacity (for example, as a paid nanny), you still need to work more than 30 hours per week to qualify for employer-paid SG contributions.
There are annual limits or caps on the amount of money you and your employer can contribute into your super account. If you’re aged under 18, you are subject to the same caps or limits on your super contributions as an adult.
From 1 July 2021, the annual general concessional (before-tax) contributions cap is $27,5000 for everyone, regardless of their age. From 1 July 2017 to 30 June 2021, the annual general concessional contributions cap was $25,000.
Some people may have a higher annual concessional contributions cap for a particular year. From 1 July 2018, you can make carry-forward concessional contributions if you qualify. Carry-forward contributions allow you to use any of your unused annual concessional contributions cap for up to five years to make a larger concessional contribution in a future year.
From 1 July 2021, your annual general non-concessional (after-tax) contributions cap is $110,000. From 1 July 2017 to 30 June 2021, the annual general non-concessional contributions cap was $100,000.
If you receive an inheritance or a large sum of money you would like to contribute to your super account, you may also be eligible to contribute up to three years of your annual non-concessional cap in a single year. Using the bring-forward rule, you may be able to contribute up to $330,000 ($110,000 x 3 years = $330,000) in a single year.
Personal (or voluntary) tax-deductible contributions
If you are under age 18 and would like to make a personal contribution into your super account and claim a tax deduction for it, a special rule applies. To be eligible to claim a tax deduction if you are under 18 at the end of the financial year in which you plan to claim the deduction, you must have earned some income as an employee or as a business operator during that particular financial year.
Remember, once you put contributions into super, the money can only be accessed if you meet a condition of release such as permanently retiring after reaching your preservation age, reaching age 65 or becoming permanently incapacitated or terminally ill.
Contributions made by someone other than an employer
If you are aged under 18 and a parent or other relative decides to make contributions into your super account, these contributions will count towards your annual non-concessional (after-tax) contributions cap.
First Home Super Saver (FHSS) Scheme
Buying your own home is a goal for many young people and the government’s FHSS Scheme could be a useful way to save part of your deposit inside the lower-taxed environment of the super system.
Your FHSS contributions are counted towards your concessional or non-concessional super contribution caps. Currently, you are eligible to apply to release up to $30,000 from your super account under the FHSS Scheme. But in the May 2021 Federal Budget, the government announced this amount would rise to $50,000. This proposal is not yet law, but is intended to start from 1 July 2022.
Self-managed super funds (SMSFs)
Although it’s never too young to start thinking about your retirement, you can’t be a trustee and run your own super fund if you are aged under 18.
You can, however, be a member of an SMSF if you are under 18 – provided you are represented by a trustee who agrees to act on your behalf (such as a parent or guardian).
Superannuation death benefits
If you are aged under 18, you get special treatment if you receive a death benefit paid from a super fund on the death of a parent.
The special rules applying in this situation mean you are automatically treated as a dependant for super and tax purposes, so you will receive the super death benefit without needing to pay any tax on it.
2. Withdrawing your super
Getting your money
To withdraw your savings from your super account, you need to have reached your preservation age and met a condition of release.
If you are aged under 18, your preservation age is 60, as you were born after 1 July 1964.