Super 101
Some elements of super can appear complicated, but the concept is actually quite simple.
Super 101

What is Super?

Super is a means of setting money aside throughout your working life to be accessed later as retirement income.

Whilst you are working, most Australian employees receive a regular contribution from their employer of 9.5% of their salary during their employment with the organisation. This is paid to a complying super fund.

Over time your superannuation contributions build into a larger sum that earns investment income and continues to grow for your retirement. When you retire this money is paid to you either as a lump sum or a superannuation pension.

Super funds are run by trustees who are responsible for investing your money with reasonable care and diligence. They have their own rules but complying superannuation funds must also follow Government rules which are designed to ensure all superannuation is properly managed.

A widely held myth is that compulsory super alone will be enough to provide a comfortable retirement. This may not be the case. The good news is that it’s easy to take control of your super now.

How do I save super?

For most people. Your employer pays money – ‘contributions’ – into a super account for you.  This is called Super guarantee. They pay these contributions on top of your salary and wages.  There are laws about how much super your employer must pay.

Generally, your employer must pay super for you if you are:

  • 18 years old or over, and are paid $450 or more (before Tax) in a calendar month.
  • Under 18 years old, being paid $450 or more (before tax) in a calendar month and work more than 30 hours a week.

This applies whether you work casual, part time or full time hours, and if you are a temporary resident. You may also be eligible if you are a contractor who is paid primarily for labour, even if you have an Australian business number (ABN).

How is money paid into my super?

From 1st July 2014, your employer is required to pay a minimum of 9.5% of your ordinary time earnings into super.  This is set to gradually rise over the coming years.

Ordinary times earnings are what you generally earn for ordinary hours of work, including over award payments, certain bonuses, allowances, and some paid leave.  Payments for overtime hours are generally not included in ordinary time earnings.

You can also add your own money in to your super savings, sand sometimes the Australian Government puts money in too.

How do I choose a super fund?

Most people can choose a super fund they want their contributions paid into.  If you’re eligible, your employer must give you a standard choice form within 28 days from the day you started working for them, so you can make this choice.  

If you don’t choose a fund the employer will choice one for you.

All employers must have a nominated super fund or default fund where they make SGC for their employees who have not selected a preferred fund.

How do I increase my Super?

As well as employer contributions, you can add to your super by making your own contributions.

You may be eligible for salary sacrifice from your before tax income, or contribute to super from your after tax income.

If you do choose to salary sacrifice, your contributions paid for by your employer may be less due to your new reduced salary.

There are limits called ‘Caps’ on the amount you can contribute to your super fund in each financial year without having to pay additional tac on those contributions.

At this stage the cap is $25,00 per annum and if you are going to pay more into your fund per year to your super (including employer contributions), you should seek advice from a suitable qualified financial planner here at Wealth Smart as you could be paying additional tax you are not aware of.

There are a few easy ways to increase your super:

Find your lost super – It’s estimated that one in every three workers has some lost super. A lost super search will find if you have some super from another employer sitting there waiting to be found. Once you have located your lost super, you can consolidate it into one super account.
Consolidate your super – If you have worked for more than one employer, chances are you have more than one super account. Consolidating or rolling over your super into one account can reduce the number of fees you currently pay and makes it easier to keep track of and manage your super affairs.