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Superannuation - The key facts
Governments constantly change what are already unnecessarily complex rules. Below we attempt to bring you the basics, but you should remember there are always conditions and refinements.
What is superannuation?
Superannuation is savings put aside for your retirement or if you become an invalid or for your beneficiaries upon your death.
Why should I contribute to super?
So you have savings for retirement and because it is a great form of investment for three primary reasons:
there are substantial tax concessions on contributions for most people
the income from a super fund is subject to only 15% tax and
eventually you can take it all out as a tax-free pension or lump sum.
What happens to the money?
Your super is usually invested in shares, property, fixed interest securities or cash.
Can I decide what my super is invested in?
Generally you can decide whether you want your super in growth, balanced or conservative funds and in what proportions.
Is it compulsory?
Yes, as a general rule employers must contribute 9 per cent (rising to 12% between 1 July 2013 and 1 July 2019) of salaries to super.
How much can I contribute?
For the 2009/10, 2010/11 and 2011/12 years, the concessional cap is $25,000 if you are under 50 and $50,000 if you are over 50.
Can I put more than that in?
If you are over 50 you can invest up to $150,000 a year in super but only as after tax contributions*.
*these are not tax deductible and also called non-deductible, non-concessional, un-deducted or personal contributions
Does the government put money in?
Yes the Australian Tax Office makes what is called a co-contribution (matching your own contribution dollar for dollar) of up to $1000 providing you earn less than $31,920 pa. This co-contribution reduces if your income is above $31,920 and cuts out altogether at an income level of $61,920 pa.
Do I save tax?
Yes, significant tax concessions make super an attractive form of saving.
Does my super fund pay tax?
Yes it does at 15% of the contributions it receives from you and at 15% on investment earnings.
Do I pay tax on benefits from my super fund?
Benefits paid from a taxed super fund are free of tax if you are 60 or over. If you take the benefit as an income stream you won’t pay tax on that. But if you take a lump sum from your Super Fund and then invest it as personal savings, you will be up for tax on that investment income.
How much super do I need?
There are many variables but we apply 7.5% to total super to calculate expected annual inflation-protected income for those retiring at 65, eg $600,000 should yield $45,000 pa, $1,000,000 should yield $75,000 pa.
When can I get my super?
As a general rule and at present you can access your super when you reach preservation age (see table below) and retire or when you turn 65, even if you are not retired. But there are other circumstances when you can get it earlier.
Your date of birth
Minimum age for getting your super benefits
From 1 July 1964
1 July 1963–30 June 1964
1 July 1962–30 June 1963
1 July 1961–30 June 1962
1 July 1960–30 June 1961
Before 1 July 1960
Note that the age pension age will be gradually increased to 67 years of age. The new pension changes will apply to new pension entrants from 1 July 2017, which will mean that it applies to people who are 57 years of age or younger on July 2009.
What happens to my super if I die early?
Most funds let you nominate who you want your death benefit paid to, either as a ‘non-binding’ or ‘binding’ nomination. The trustee of the fund will exercise discretion about who it is paid to if a ‘non-binding’ nomination. Be aware that if it’s paid to people who are not your dependants (for tax purposes this includes children over 18) it may be taxed.
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