Superannuation is one of those things we should all know and care about. But instead, it tends to be one of those topics we brush over or leave for another day.
Welcome to “another day”! Let’s talk Super.
What is Superannuation?
Super is a compulsory Australian Government initiative that was introduced in 1992 for working Australians. It was introduced as a countermeasure to address the aging population and effect paying older non working Australians has on the budget. Your employer contributes a set amount (min is 9.5% of your pre tax salary, however some employers have a higher contribution incentive) into your Super account that sits and hopefully collects interest until you retire. Basically, think of it as a savings account for your retirement.
When do I qualify for Super contributions?
Basically, if you are over 18 and earning more than $450 per month then your employer is contributing a minimum 9.5% into your super fund. This is called the Super Guarantee (SG). You are entitled to this regardless of whether you are employed full time, part time or casual.
Important note: Your super contribution does not come out of your pay. It is an additional entitlement paid by your employer pre tax.
When can you access your Super?
Unfortunately, unlike personal savings accounts, your super is tied up until you reach preservation age. This is the legal age by law that your super must be preserved until. It is currently set at between 55 and 60 years depending on when you were born. You can check your preservation age here.
Can I pay extra into my Super account?
Absolutely and this is where we are headed. Any good accountant or financial advisor worth their weight in gold will tell you to top up your super. No one knows what the future will hold or how rules will change as the population ages. Your super is your nest egg. Your financial security in your retirement. The more you have in your super fund when you do retire, the longer you will be able to sustain yourself and your family.
Setting up your Super fund.
Setting up a Super fund that works for you is really important. You need to make sure it suits your current working and financial situation as well as the ability to provide in the future. Super funds can be divided in low risk, medium risk and high risk. The higher the risk the greater the interest. But as the name suggests, you’re at a greater risk of losing money as well should the market crash.
Don’t have a super fund?
Your accountant can help you set up your super fund to secure your future in retirement. If you don’t have an accountant, feel free to contact us and we’ll be happy to help you out.
Looking to set up a Self Managed Super Fund? We have that coming in our next blog.