Trying to understand superannuation and how super works in Australia? Read more to find out what you need to know.
Whether you're working in Australia as a permanent resident, international student or holidaymaker, you're likely to be paid superannuation.
We've put together this guide to help you understand the basics of superannuation in Australia, to help you to know what's going on with your money.
What is superannuation?
'Superannuation' is a uniquely Australian term, but it's similar to 'pensions' in many other countries.
Superannuation, or 'super', is money that is paid by your employer and put aside in a fund in preparation for your retirement. It is part of the Australian pension system designed to give you a regular income after you stop earning a wage.
The Association of Superannuation Funds of Australia (ASFA) stresses the importance of super when it comes to retirement.
In 2017, ASFA CEO at the time, Dr Martin Fahy said "Super is still the best game in town for funding your retirement. Concessional tax treatment of super leads to more dollars of savings being invested and higher after-tax investment returns from all forms of investment compared to being directly held by individuals."
Generally speaking, super can be accessed upon retirement (if you become a permanent resident of Australia) or when you leave Australia (if you're on a Working Holiday visa, Student visa or another temporary visa).
How does superannuation work?
Superannuation is managed by superannuation funds, which are highly-regulated organisations that hold and invest your super until you can access it.
Your super is steadily topped up through regular contributions made by your employer to the super fund of your choice. The money in your super is then used by your super fund to invest in things like property and shares, with the goal of growing your balance over time to help fund your retirement.
Super contributions can be made a few different ways.
- If you're employed by a company and over 18 years, your employer must make contributions to your super on your behalf, regardless of how much you are paid.
- If you're under 18, you are eligible to receive super if you work more than 30 hours a week.
Currently, your employer has to pay an amount equal to 11% of your salary into your super account, on top of your usual earnings. This is known as the Superannuation Guarantee.
The amount your employer contributes is based on your 'ordinary time earnings' – made up of your ordinary hours of work plus any over-award payments (e.g. some types of paid leave, bonuses, commissions and allowances).
If your salary specifies that it does not include super, it means the amount your employer must contribute is on top of your ordinary time earnings. You might see this referred to as your salary 'plus super' or 'excluding super'. So, if your ordinary time earnings are $75,000 per year, your employer must contribute an extra $8,250 to your super.
Sometimes, your salary package is inclusive of super. This can be referred to as your salary 'including super'. That means that if you're earning $75,000 including super, your ordinary time earnings are $67,568 and your employer is contributing $7,432 to your super.
If you are a casual worker, the super contribution will be 11% of your earnings. If you make $450 in a week, for example, your employer will contribute $49.50 to your super. If you make $500 the next week, your employer will contribute $55 to your super.
Just note there is an Australian super contributions tax of 15% for employer contributions, which is automatically taken out.
Unfortunately, sometimes businesses fail to meet their obligations to pay super to their employees – see 'Why it pays to check your employer is making super contributions'. You can always check how much super has been paid by looking at your payslip or accessing your super account to check transactions.
You can also top up your super by making contributions yourself. There are a few different ways you can make extra super contributions.
Salary sacrificing involves having a portion of your income "sacrificed" into your super account instead of your regular bank account. This is on top of the regular contributions made by your employer.
You can also make additional voluntary contributions to your super. This might be a lump sum taken from a cash bonus, or it could be a regular amount you put into your super each month.
To read more about the different types of contributions you can make, check out our guide to making extra contributions to your super. However if you are in Australia on a temporary visa, it's important to understand the tax consequences on withdrawing these additional contributions compared to receiving them as salary.
How to choose a super fund
In most cases, you can choose your own super fund – as long as your chosen fund complies with super regulations. The only situations in which you can't pick your own super fund are where you're covered by a particular industrial agreement or if you're part of a defined benefit fund. You can ask your employer whether either of these conditions apply to you.
You have the right to choose your own fund, but it's not compulsory. If you don't select one, your employer will need to go to the ATO (Australian Taxation Office) to get details of your stapled fund. If there's no recently stapled fund, your employer can pay your super guarantee contributions into a fund they choose from among those that offer a MySuper product.
There are several super funds for you to choose from in Australia, so you'll need to do a bit of research to find one that suits your needs. Consider things like fees, how your money is invested through the super fund, what insurance options are included in the fund, and any other benefits that the fund offers.
ANZ Smart Choice Super allows you to choose the types of investments you want to make through your super. You can also opt for different levels of insurance and easily manage your super through ANZ Internet Banking. Find out more about ANZ Smart Choice Super.
I have multiple superannuation accounts – what do I do?
If you have multiple super accounts from previous jobs in Australia, it's worth considering consolidating your super so all of your money is with one fund. This will ensure you can avoid paying separate fees for each fund, and there's less to keep track of. As a consequence, there's a lower chance of forgetting about any of your super if and/or when you leave Australia.
You can consolidate your super through the ATO, or you can contact your super fund – they might provide a service where they do it on your behalf. ANZ Smart Choice Super makes it easy to consolidate your super and find any lost super hiding in other accounts. ANZ Smart Choice Super offers a straightforward ‘Find my super' online tool that will instantly locate your other super accounts.
For more information on sorting out multiple super accounts, we've put together a handy guide to consolidating your super.
When can I access my super?
If you're planning on settling in Australia long-term as a permanent resident visa holder, the normal super rules will apply to you once you receive your permanent residency visa. This means that, typically, you can access your super when you reach what is called 'preservation age'. This is between 55 and 60 years old depending on when you were born. When you reach this age, you can get access to your super as long as you're permanently retired. Otherwise, you can access it once you turn 65.
If you're on a temporary visa, we've outlined below what happens to your super when you leave the country.
What happens to my super when I leave the country?
If you're on a Working Holiday visa, Student visa or any other type of temporary visa and you plan to leave Australia permanently, you can apply to take your super with you and access your Australian super overseas. This involves applying for a Departing Australia Superannuation Payment (DASP), which is paid as a lump sum.
In order to claim a DASP, you'll need to meet the following requirements:
- You're not an Australian or New Zealand citizen, nor are you an Australian permanent resident
- You entered Australia on a temporary visa (excluding subclasses 405 and 410)
- Your visa is no longer valid – whether through expiration or cancellation
- You've left Australia
Note there is a tax on DASPs. Depending on the type of visa you were on in Australia, you'll be taxed at a different rate when your DASP is paid out. The DASP is made up of two portions: the taxed element and the untaxed element.
- For any temporary visas other than the Working Holiday visa, the tax rate for the taxed element is 35%, and the tax rate for the untaxed element is 45%.
- If you're on a Working Holiday visa, you'll be taxed at the rate of 65% for both elements. This applies to your whole balance, even if only part of the contributions in your account were received under a Working Holiday visa. This is worth keeping in mind if considering combining your super accounts if you have both contributions relating to a Working Holiday visa and another temporary visa.
It's best to apply for the DASP within six months of leaving Australia. After this period and if your visa has expired, your super fund may transfer your super to the ATO as unclaimed super money. You can still claim your super, but there is a different process involved.
You can apply for a DASP by filling out an application form (PDF). If you're claiming from several funds, you'll have to fill out a new form for each fund. If your money has been transferred to the ATO, you'll need to use a different form.
Make superannuation simple and straightforward
Looking for a superannuation account that makes it easy to manage your super in Australia? ANZ Smart Choice Super offers below average fees,disclaimeroptional insurance, and a simple tool to bring all your other super into one fund.
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