Superannuation

If you are 18 years or older and classified as an employee for tax purposes, your employer must make Superannuation Guarantee (SG) payments to your super fund on your behalf. The SG requires your employer to contribute a specific percentage of your gross income, including bonuses, commissions, and loadings.

While employees can choose their preferred super fund in most cases, there are exceptions. Industrial agreements, membership in specific funds, or employment in the public sector may limit or alter the ability to choose a super fund.

The percentage rate for Superannuation Guarantee contribution payments by your employer is currently 11%. The SG percentage rate is scheduled to increase by 0.5% every year until it reaches 12% from 1 July 2025.

When selecting your super fund, you gain the opportunity to decide how your super is invested. Many funds offer diverse investment options, including pre-mixed portfolios, ethical or sustainable investments, and direct investments in shares and other assets.

If you do not choose a specific fund, your employer will contribute to your “stapled fund” or a default fund chosen by your employer. The default option typically offers low fees and straightforward attributes.

Non-concessional contributions are after-tax contributions that do not claim a tax deduction. The annual limit for non-concessional contributions is $110,000, and individuals under 75 can contribute up to three times the yearly cap within a single year using the bring-forward rule.

Exceeding the non-concessional contribution limit requires withdrawing the excess amount, which may be subject to additional taxes. Monitoring personal contributions to avoid unintentional overpayment and understanding the tax implications is essential.

The First Home Super Saver Scheme and the downsizer measure are two special measures introduced to address housing affordability. The First Home Super Saver Scheme allows individuals to contribute voluntarily to their super to save for their first home purchase. Downsizer contributions, on the other hand, enable eligible individuals aged 55 or older to contribute up to $300,000 from the proceeds of selling their home to their super.

Investment earnings within your super fund are subject to a maximum tax rate of 15%. Capital gains from the sale of assets within super are also taxed at concessional rates, resulting in lower effective tax rates than holding investments outside of super.

During the retirement phase, typically called the pension phase, investment income and capital gains from super pensions are often tax-free, with exceptions for specific circumstances and funds.

In most cases, you can access your superannuation once you reach your preservation age and retire. Preservation age varies based on your birthdate, gradually increasing from 55 to 60. Accessing your super earlier than the preservation age is generally allowed only in situations like financial hardship, disability, terminal illness, or death.

Withdrawals from taxed super funds become tax-free for individuals aged 60 and above. Different tax rates apply to untaxed funds and withdrawals made by individuals younger than the preservation age. 

Consult a qualified financial adviser before you consider accessing your super so that they can provide the best advice.

Upon your passing, your super fund provides a death benefit to your dependents or estate. It includes the remaining balance of your super account and any applicable insurance benefits. Designating your preferred recipients through non-binding or binding nominations ensures the proper distribution of your death benefits.