Superannuation

Superannuation is an investment designed to provide money for your retirement. Most people start it when they start work because their employer has to pay contributions. You can choose to top up the funds out of your own pocket. If you are self-employed you can choose whether or not to have it. It can grow to be a significant asset over your working life.

You benefit from saving regularly over many years. Your superannuation fund makes the savings work for you by investing them, and your money is generally taxed more lightly than other forms of investment. Your superannuation fund may also offer life insurance cover and disability insurance.

Types of Superannuation

1. Accumulation funds: Your retirement benefit depends on how much you accumulate over your working life, which will be the money paid in plus investment earnings less expenses.
2. Defined benefit funds: The value of your retirement benefit is defined by a set formula which, for example, may take into account your length of services and age at retirement. Defined benefit funds are common in the public sector. They are also used by some large companies.

Your employer will pay superannuation contributions on your behalf unless you are exempt or you are self-employed. This contribution is called the Superannuation Guarantee. It is compulsory for most employees. You can also choose to make personal contributions to your superannuation from your net income after tax. If you do, you may be eligible for the Government Co-contribution which the Australian Taxation Office calculates and pays, based on your tax return and information received from your superannuation fund.