No matter your age, if you’re employed, you’ve heard of superannuation. This is money that your employer pays into an account set up for your future after retirement. Laws determine how much your employer should pay into your super account. Since superannuation provides for your retirement, it’s an incredibly important asset. Even knowing this, many Australians are understandably confused by the details of superannuation. The truth is, understanding how superannuation works is a vital part of your financial health — and it really isn’t as complicated as it sounds.
Who Receives Super?
Your superannuation contributions are paid by your employer in addition to your usual salary and wages if you are at least 18, and are paid $450 or more in a calendar month, or if you are less than 18, but are paid $450 or more a month and work more than 30 hours a week. These rules apply regardless of whether or not you are a part-time or full-time worker, or even if you’re a temporary Australian resident (you can apply to receive this money upon leaving Australia). Contractors may also qualify for super contributions, and self-employed individuals can contribute to their own super.
Currently, employers pay at least 9.5% of your regular work time (usually not overtime) into your super fund, but this amount will rise again in a few years.
Importantly, you can also choose to contribute your own money to your super account, as well — and, you’ll likely want to do this.
Choosing Your Superannuation Fund
Most employees are able to choose their super funds. If you are eligible, your employer should provide you with a form (called a Standard choice form) to select your choice within a few weeks of beginning work. If you don’t select a fund, your employer will pay into a “default” fund for you. If you already have a super fund, you can choose to continue paying into the same account, or contribute to a different one.
Ultimately, when funds are placed into your super, this money goes on to be invested. As such, taking on an active role when it comes to choosing your super fund, and exploring these investment options, can greatly affect your returns and financial future.
Contributing to Your Own Super Account
You can make your own superannuation contributions on top of the contributions being made by your employer, and this can make a significant difference in the amount of money you have available when you retire. Of course, before contributing your own money to your superannuation account, you want to be sure that you are in a good financial place in your life. Get rid of those credit cards and develop a healthy personal budget before adding extra money to your superannuation fund. However, when you are ready, you can make your own contributions in a variety of ways.
Ask your particular super fund about your options. Usually, employees choose to have their employers deposit a portion of their pre-tax income, or they elect to allow their employer to deposit portions of their after-tax income into the account. Lower income earners who choose to place a percentage of their after-tax income into a super fund are often eligible for bonus contributions from the government.
While contributing to your super fund will help you grow a larger retirement fund, it’s important to note that there are caps on how much money you can contribute without tax penalties. If you would like to make large contributions to your super fund, speak with your fund and contact us at TCA Darwin. We can properly advise you on how these contributions may affect your taxes.
Superannuation and Small Businesses
Running your small business will involve paying into the superannuation funds of your employees (unless, of course, you don’t actually have any employees).
You’ll need to pay your contributions by the quarterly cut-off dates, and provide eligible employees with a Standard choice form to choose their super fund. You’ll also need to keep records of your payments.
What About the Self-Employed?
If you are self-employed, you are not required to pay into a super fund for yourself. However, you may choose to contribute to your own fund to secure your financial future after retirement. You can voluntarily make contributions and receive certain tax advantages and incentives. This is something that you’ll want to discuss thoroughly with your TCA Darwin agent.
When Can You Access Your Superannuation Fund?
While there are certain, rare exceptions, you usually cannot withdraw the money from your super fund until you have reached the age of retirement, known as your preservation age. This age varies depending on when you were born. If you were born after June 1964, your preservation age is 60 years. If you were born before 1964, the age you can withdraw ranges from 55 - 60 depending on your year of birth:
Understanding Superannuation with TCA Darwin
Superannuation funds are an essential part of your retirement plan, but it’s easy to find the complexities of it all to be overwhelming. TCA Darwin can help you plan for, and understand, issues like contribution caps, taxes on your super, and related issues that may be present based on your individual situation. We can also advise your small business, or assist you as a self-employed individual. Book an appointment at our Darwin or Palmerston office to discuss your needs.