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Even to people who have been paying into a superannuation fund for years, Australian super can be a goddamn minefield. But to find the best super fund, super rates and superannuation tips, you first need to understand the basics about how super works.
Enter: us. We’re going to answer some key superannuation questions that you may be too embarrassed to admit you still don’t understand in a totally judgement-free zone, so you can go forth and maximise your super.
Does my employer have to contribute to my superannuation for me?
If you’re 18 or over and are paid $450 or more (before tax) in a month, your employer should contribute at least 9.5% of your ordinary earnings (your rate before any overtime) into super for you. This is known as the super guarantee (SG).
The rate will gradually increase: in 2021 it will go up to 10%, then it will increase by 0.5% each year until July 2025, when it will reach 12%.
Anyone under 18 you have to work at least 30 hours in a week to get the 9.5% super contribution.
What is salary sacrificing?
Salary sacrificing is a tax-effective way to add money to your super fund. It involves arranging with your employer to direct part of your pre-tax salary directly into super. These contributions will be taxed when they go into the fund at the usual 15% rate for super, which will probably be lower than your marginal tax rate. But there are limits to how much you can add through salary sacrificing…
What’s the difference between industry, retail, public sector and corporate funds?
Industry super funds are those that were originally set up by trade unions and employer groups to provide their members with low-cost access to super. They can do this because they are not-for-profit organisations.
Today many industry funds are open to anyone (that is, they are public offer funds). Retail funds are run by banks or investment companies and traditionally were more expensive than industry funds, although the price gap between them has been narrowing.
Then there are public sector funds, which were created for employees of federal and state government departments and mostly are only open to government employees. They generally have very low fees and profits are put back into the fund for the benefit of all members, says the MoneySmart website.
Finally there are corporate funds, which are generally open only to people working for a particular employer or corporation.
What is MySuper?
MySuper is essentially a default option. The superannuation contributions made by your employer will be paid into this if you don’t actively nominate an investment option.
MySuper products are meant to be a simple and cost-effective option. They offer lower fees (and restrictions on the type of fees you can be charged), simple features so you don’t pay for services you don’t need and a single diversified investment option or a life-cycle option.
Can I choose what fund my superannuation contributions go into?
You can make personal contributions to any fund and most people can choose which super fund their employer’s contributions are paid into.
If you’re eligible to choose a fund, your employer must give you a “standard choice form” so you can make that choice in writing. If you don’t nominate a super fund, your employer will choose a fund for you and it will be a MySuper product.
There are, however, some instances where you’re not eligible to choose the super fund you want your super guarantee contributions paid into. This might be if your super is paid under a state award or industrial agreement, you’re a federal or state public sector employee, you’re excluded from super choice by law or regulations or you’re in a particular type of defined benefit fund or have already reached a certain level of benefit in that super fund, explains the tax office. Your employer or union should be able to tell you if you can choose.
