If the idea of superannuation doesn’t excite you, yet, imagine, instead of super, that you were being paid overtime for work outside your normal work hours.
And if you expected to be accumulating this money every week, you’d be doing some research on how much overtime your company usually paid, what you needed to do to be entitled to overtime and when you expected to be paid this extra money.
For example, say you earn $60,000 a year and you worked just under 4 hours of paid overtime every week for a year. If this overtime worked out to be $5,700 a year, you’d probably be checking your pay slip to ensure that you received your extra money.
Or, if you’re earning $90,000 a year, and you worked just under 4 hours of paid overtime a week, then you’d expect to receive $8550 (less taxes) for your time and trouble.
Now, close your eyes and, instead of overtime, think of your compulsory employer contributions, otherwise known as Superannuation Guarantee (SG). Your employer is required to pay the equivalent of 9.5% of your ordinary times earnings into a super fund, at least quarterly.
If you’re earning $90,000 a year, then $8,550 (less 15% super contributions tax) is being paid into a super fund on your behalf each year, or the equivalent of working just under 4 hours of paid overtime a week.
If you earn $60,000 a year, you’re entitled to $5,700 a year in SG, that is, the equivalent of 9.5% of your ordinary times earnings. Receiving that amount means you get nearly the equivalent of 52 hours of pay, paid into your super fund every three months, based on a 40-hour week.
Another 52 hours’ worth of pay is more than a week’s work and you only pay tax on these contributions when it enters the super fund. Plus, you usually pay a lot less tax than if you receive it as cash for working overtime. Over a year, 9.5% of your salary works out to be the equivalent of nearly five weeks’ pay. Do you still need to close your eyes and imagine your super is overtime with tax breaks? And you don’t even have to work the extra hours to be entitled to this super money.
For more super tips for beginners, see the following SuperGuide articles:
- Super Tip No 2: Love your super like your own
- Super Tip No 3: Turn $1000 into $1500 in three steps
- Super Tip No 4: Understand what happens to your super money
For more information on the super basics, see the following SuperGuide articles: