How super works

ASIC’s MoneySmart
moneysmart.gov.au

 

Superannuation basics

If you’re hoping for a comfortable life in retirement, spend some time learning about your superannuation (super). Taking a few steps now could significantly boost your super and make a big difference to your future lifestyle.


What is super?

Superannuation is a tax effective way to save for your retirement. It’s similar to a managed fund where your money is pooled with other members’ money and invested on your behalf by professional investment managers. Generally you will not be able to access this money until you retire.

Your employer will make contributions to your super fund and you can top it up with your own money. The government may also make contributions if you are a low income earner.


How to choose a super fund

Most people can choose which super fund they’d like their super contributions paid into. Check with your employer to make sure you can choose the fund your super is paid into. Super comparison websites can help you compare super funds. See choosing a super fund.

Some industrial awards specify a fund or a choice of a few funds that super must be paid into. In these cases you may have limited or no choice of fund.

When you can choose your super fund, tell your employer by filling in a standard choice form from the Australian Taxation Office (ATO) or from your employer. If you don’t (or can’t) choose your own super fund, your employer will put the money into a ‘default’ super fund, known as a MySuper account. See types of super funds.


Insurance through super

MySuper funds have a default level of death, disability and income protection insurance that you will automatically be covered for. If you don’t want this insurance you will need to tell your super fund you want to cancel it.

Insurance through super can be cheaper than similar cover outside of super and you can usually request to increase it if the default cover is not enough to suit your needs. See insurance through super for more information.


How do I make super contributions?

There are typically three types of super contributions: employer contributions, personal contributions and government contributions.


Employer super contributions

For most people, your employer must pay an amount equal to 9.5% of your salary into your super fund account. This is on top of your salary or wages. Over the course of your working life, these contributions from your employer add up, or ‘accumulate’, which is why they are known as accumulation funds. Your super money is invested by your super fund so you will earn investment returns on the money.

Employer contributions are based on your ‘ordinary time earnings’. For example, if your ordinary time earnings are $50,000 then you should be paid an additional $4,750 into super. Ordinary time earnings are what you earn for ordinary hours of work including over-award payments, bonuses, commissions, allowances and certain paid leave. See the ATO’s information on using