Super Basics 101
Superannuation is a tax-effective way to save for your retirement. Here are some basic facts about super that you should know.
Fact 1: The government wants us to fund our own retirement
Australia has an ageing population. About 15% of the population are currently aged 65 and over, and this number is predicted to rise to 22% over the next 40 years. This will place a strain on the government’s ability to provide the aged pension for Australians in retirement.
Fact 2: Concessional contributions to super are taxed at just 15%
Concessional (pre-tax) contributions to super are taxed at just 15%. This rate is lower than even the lowest marginal tax rate in Australia. You can make up to $25,000 worth of concessional contributions to your super in any one year. This is known as the concessional contributions cap.
Fact 3: If you’re an employee, your employer must contribute to your super on your behalf
If you’re an employee over the age of 18 and you earn more than $450 per month, your employer is legally obliged to contribute 9.5% of your ordinary time earnings into your super. This is known as the superannuation guarantee. The percentage is scheduled to increase over the next few years, as outlined in the table below.
|Time period||Superannuation guarantee percentage|
|Up until 30 June, 2021||9.5%|
|1 July 2021 to 30 June 2022||10%|
|1 July 2022 to 30 June 2023||10.5%|
|1 July 2023 to 30 June 2024||11%|
|1 July 2024 to 30 June 2025||11.5%|
|After 1 July 2025||12%|
Fact 4: You generally can’t access your super until you reach your preservation age and meet a condition of release.
Your preservation age depends on your date of birth, as outlined in the table below.
|Date of birth||Preservation age|
|Before 1 July 1960||55|
|1 July 1960 to 30 June 1961||56|
|1 July 1961 to 30 June 1962||57|
|1 July 1962 to 30 June 1963||58|
|1 July 1963 to 30 June 1964||59|
|After 1 July 1964||60|
Standard superannuation conditions of release are:
- reaching your preservation age and retiring.
- reaching your preservation age and beginning a transition-to-retirement income stream.
- ceasing an employment arrangement after you turn 60.
- reaching 65 years of age (even if you haven’t retired).
Fact 5: Your super proceeds over the age of 60 are tax free.
That’s right. No matter whether you access your super as a lump sum or pension, the proceeds are tax free once you turn 60.
Fact 6: Self-managed super funds (SMSFs) are on the increase in Australia
There are nearly 600,000 SMSFs in Australia. This number is increasing at an average rate of 5% per year. As the name suggests, SMSFs allow you to manage your own super funds. An SMSF can have between 1 to 4 members, and it must adhere to super legislation. It’s important to seek professional advice if you want to set up and manage your own SMSF.
The other main super fund options are:
- retail funds (run by banks or investment companies – they are open to anyone to join).
- industry funds (run by industry sectors – some of these funds are open access, while others are restricted to people working in a specific industry).
- public sector funds (for government employees).
- corporate funds (a fund arranged by an employer for their employees).
Fact 7: The average superannuation balance for men at retirement age in Australia is $270,710 and $157,050 for women
These are the latest figures from the Association of Superannuation Funds Australia (ASFA). Major reasons for the discrepancy include:
- women taking more time out of the workforce for family reasons
- women being more likely to be in part-time or lower paid occupations.
How we can help
At Resource Super, our experienced, expert team of superannuation advisers can help you to build your retirement nest egg. We can also help you if you want to set up your own SMSF. We’ll take the time to understand your individual circumstances so that we can provide you with the best possible advice. We develop long-term, trusted relationships with our clients.
Contact us today to find out how we can help you!