Superannuation is a system where a percentage of your earnings (and any additional contributions you make) is pooled into a super fund with other members’ money and invested on your behalf to provide for your future retirement. Employers are required by law to contribute at least 10% of each employee’s earnings into their superannuation fund. You will generally pay less tax on your money in a super fund than money you earn outside of super. You generally can’t access your money in superannuation until you retire. Once you retire, you can take your money out of your superannuation as a regular income stream or one or more lump sum payments. Until 1976, superannuation was a negotiated system between workers and employers, and has been in place in various ways for government workers and white-collar workers since the 1800s. In 1983, the government expressed support for the principles of employee superannuation, and in 1991-1992 a full system of compulsory super as we largely know it today was announced.
The Superannuation Guarantee rate is the percentage of your earnings (as an eligible employee) that an employer is required to contribute to your super fund. The rate is set by the government and is currently 10%. This is subject to change in the future, with the government proposing to increase the rate to 12% by 2025.
Since 1991-92, it has been compulsory for employers to allocate a percentage of eligible employees’ earnings to a complying superannuation fund. In 1991-92, 80% of Australians had a super account and now all those in Australia who receive ‘eligible earnings’ are required by law to be paid superannuation. If you are an employee earning $450 or more pre-tax in a month, then your employer must pay super to your super fund on top of your earnings.
Superannuation rulesSuperannuation rules define how the super system works for super fund members. It includes such things as the Superannuation Guarantee (SG) rate, how your investment earnings are taxed, caps on how much you can contribute to super each year, and when you can access your super. Superannuation rules are regularly reviewed and updated by the government. Often planned changes are announced by the government each year in its federal Budget.
A superannuation payment refers to money that can go into or out of your super account. Contributions into your super typically happen in three ways – 1. Employers are required to contribute at least 10% of eligible employees’ earnings into each employee’s super account at least four times per year. This is called the Superannuation Guarantee, 2. You or your employer can make additional contributions into your super from your before-tax earnings. This includes salary sacrifice arrangements between you and your employer, 3. You can make a voluntary contribution to your super from your after-tax savings. You may be able to claim a tax deduction for these contributions. Or you may be eligible for a co-contribution from the government, or claim a tax offset. Don’t forget there are caps on how much you can contribute to super each year. Payments out of your super include benefit payments, as a lump sum or a pension (also known as a superannuation income stream) once you retire or are otherwise eligible to access your super.
Late superannuation payments
Employers who do not pay the minimum amount of superannuation guarantee for their eligible employees into the employee’s super fund by the due date can be liable to pay the super guarantee charge (SGC). This charge is made up of the shortfall in superannuation guarantee amounts the employee is entitled to plus interest and an administration fee. Find out more information about who is eligible to receive superannuation guarantee payments and payment due dates.
All superannuation funds charge members fees to cover the cost of operating the super fund and managing member accounts, as well as investing members’ money. Australian Retirement Trust’s fees are among the lowest you’ll find. You can see how we compare with other funds using the independent comparison tool AppleCheck.