What is Superannuation?
Superannuation is like a savings account for your future retirement. However, it has some unique features when compared with a normal savings account:
Your employer must pay 9.5% of your salary into the super fund of your choice, unless your employer has: – an industrial or state award in place, – certain workplace agreements in place; or you are – A federal or state public service employee. Super guarantee contributions have no age limitations, and can be paid to people over the age of 65. Super guarantee contributions are paid on ordinary time earnings. Ordinary time earnings are what you generally earn for ordinary hours of work, including over-award payments, commissions, allowances, bonuses and paid leave. Super guarantee payments are classified as employer contributions and count towards your concessional (before-tax) contributions cap each year. The ATO website provides assistance on what best suits your situation depending on whether you are an employee, contractor or are self-employed. As well, there are great tools to determine whether you are entitled to super and how much you should be paid Check with your Payroll area on how it works in your industry.
Choosing a Super Fund
Most people can choose the super fund they want their employer contributions paid into, as well as the investment options that your super savings are invested in. If you don’t choose a super fund, your employer will choose one for you. Either from an award or the workplace agreement in place If you’re eligible to choose a fund you can choose Enterprise Plan by using the Choice of Fund form available in Publications & Forms. Complete this form and get it back to your employer within 28 days of commencing employment, or at least consider this once a year.
Types of Funds
There are five basic types of super funds:
- Industry funds – These funds are sometimes open to everyone. Otherwise, you can join if you work in a particular industry or under a particular industrial award and your employer signs up with the fund.
- Retail funds – These funds are run by financial institutions and are open to everyone.
- Public sector funds – These funds are generally only open to people working for a particular employer or corporation. They may offer defined benefit funds to their members.
- Self-managed super funds (SMSFs) SMSFs work like any other super fund, but the responsibility of managing them, including their investment decisions and legal responsibilities rests solely with the trustee (you). Establishing and operating an SMSF is a major financial decision and you should first discuss your personal circumstances with a qualified professional.
Keeping Track of your Super
Your super is your savings for the future and in retirement. Being aware of what super accounts you have, how much is being contributed, and the insurance you hold, and generally being engaged with your super will help you later on in life. It can be easy to lose track of super, or to end up with a number of accounts, for example, you may have:
- joined the super fund your employer choose, then changed jobs, and started another super fund with the new employer
- changed your address, or name, or moved and lived overseas
Having several super accounts could mean multiple fees and charges, reducing your overall super investment amount for future savings. There are easy ways to find and combine your lost super. Enterprise Plan can help you find your super let you know what you have and provide transfer forms. You can also check on your super using the ATO online service MyGov.
All earnings from superannuation are taxed at 15%, instead of your personal marginal rates. This is why personal contributions are a tax effective savings vehicle for your money.
Accessing Your Super
You can access your super
- When you turn 65 (even if you have not retired), or
- When you reach preservation age and retire, or
- Under transition to retirement rules, while continuing to work
There are very limited circumstances when you can access your super savings early. These mainly relate to severe financial hardship or on specific medical or compassionate grounds. For further information, contact member services on 1800 816 575 or email email@example.com. Your preservation age is dependent on your date of birth, and is the age at which you can access your super if you are retired. Use the table in the Accessing Super page to work out your preservation age.
Adding to My Super
In addition to your employer super guarantee contributions, you can boost your super by entering into a salary sacrifice arrangement with your employer, making your own contributions or you may be eligible for government contributions. Changes to the super system announced by the Federal Government in the May 2016 budget have now been legislated and are proceeding from 1 July 2017. Read our Super Changes Pre 30 June & Post 1 July Fact Sheet or by reading the Super section of the ato.gov.au/individuals/super website. From 1 July 2017, personal super contributions rules have changed. There are now different types of personal super contributions which you can use to add to your super: a) Personal Deductible contributions that count towards your concessional contribution cap*. You can: i. Salary sacrifice (Make before tax contributions). This arrangement is negotiated with and is an arrangement with your employer to forego part of your salary or wages in return for your employer providing super contributions on your behalf. Salary sacrifice is completed in advance, and generally as you are paid during the year. If you make salary sacrifice contributions you should be aware of how your contributions will affect your super balance. You can agree with your employer for these to be in addition to your employer’s compulsory super contribution; – Salary sacrificed super contributions are classified as employer super contributions and are taxed in the super fund at the maximum rate of 15%. The sacrificed amount of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax, and are not counted as a fringe benefit is made to a complying super fund. – Be sure to check the Fair Work Commission or your employer for any special employment agreements and conditions. – Consider the additional salary sacrifice contribution may cause you to exceed your concessional (before-tax) contributions cap and attract additional tax. – The www.ato.gov.au/Individuals/Super/Growing-your-super provides further information ii. Anyone who is over age 18 and earning more than $450- per month, can boost their super balance by making personal super contributions during the taxation financial year to your super fund or into your spouse’s super fund. Personal super contributions are the amounts you contribute to your super fund from your after-tax income (your take home pay or savings). – These contributions are in addition to any compulsory super contributions your employer makes on your behalf, and do not include salary sacrifice contributions. Personal contributions can be either:
- Non concessional (after-tax) and will count towards your non-concessional contributions cap or
- Can be used to claim a personal deduction on your super contribution up to the concessional contribution cap.
If you are an employee, you generally could not claim a tax deduction for any personal super contributions made before 1 July 2017, although you may be eligible for a super co-contribution. From 1 July 2017, most people, regardless of their employment arrangement, will be able to claim a full deduction for personal super contributions they make to their super until they turn 75. However, individuals aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction. If you are in this situation, use the Over 65 – Work Test Declaration Form in Publications and Forms. To claim a tax deduction for personal contributions, you must have taxable income, and not create a tax loss by making the deduction against the super contribution. You must complete and lodge a notice of intent with the super fund, and have this notice acknowledged in writing by the Fund. The valid notice of intention to claim a tax deduction (a deduction notice) in the ATO approved form, must be given to the Fund before the earlier of:
- Lodgement of your personal tax return for the year in which the contributions were made; or
- The end of the financial year after the financial year contributions were made.
Further information can be found in the Super Changes Pre & Post 1 July 2017 Factsheet available in Publications & Forms, or on the ATO website. iii. Make a spouse contribution (available once a financial year), as long as your spouse is not yet 70 years or older; Special rules apply. Refer to the Spouse Contributions Fact Sheet available in Publications & Forms. iv. Adding to super if you are not working If you are under the age of 65, you can make personal after-tax contributions to your super fund even if you are not working. If you are over the age of 65 or older, you can only make personal after-tax super contributions if you are not yet 75 years of age or older, and have been gainfully employed for at least 40 hours over 30 consecutive days during the financial year. v. Government super contributions You may be eligible for some government assistance if you are a low income earner. You do not need to apply. If you are eligible and your fund has your tax file number (TFN), these will be paid by the ATO to your super fund member account automatically. Further information can be found here, however in summary these super contribution types include:
- Super co-contributions – Help eligible people boost their retirement savings and depending on your earnings, and whether you have made a personal super contribution to your super fund, you may be eligible for a co-contribution up to a maximum amount of $500.
- Low-income super contribution – this is a government super payment up to $500 to assist low-income earners save for retirement. If you earn $37,000 or less in a financial year, you may be eligible to receive a LISC payment directly into your super fund.
- From 1 July 2017, this payment will be called the low-income super tax offset (LISTO) to help low-income earners save for retirement. If you earn income up to $37,000, you may be eligible to receive a refund into your super account. This is on the tax paid (at 15%) on your concessional super contributions up to a cap of $500. This means that most low-income earners will pay no tax on their super contributions.
Super and Tax
The tax you pay on your super contributions generally depends on the type of contribution and how much you contribute each year. It also depends on things such as your age, the source of your benefit and how your benefits are paid, also if you are accessing your super benefits, whether they are paid as a lump sum or an income stream (regular payments). Tax on contributions vi. Before tax super contributions (Concessional) These are taxed at 15%, and include employer contributions such as super guarantee and salary sacrifice, or personal contributions that you are allowed to make as a tax deduction. There are annual limits called the concessional cap. For the financial year 2017-2018 this is $25,000. vii. After tax contributions (Non concessional) These super contributions are not subject to tax, and include contributions your or your employer make from your after tax income, as well as contributions your spouse makes to your super fund, or personal contributions that are not claimed as an income tax deduction. There are limits on the amount of after tax contributions you can make each year, and these may vary depending on the financial yar and your age. For the financial year 2017-2018, the annual amount is $100,000, however if you are aged under 65, you may be able to utilise the ‘bring forward arrangement’ and access three years of non-concessional contributions. For further information, on Super and tax and what you can contribute and how, as well as any tax impacts of contributing too much to your super, read Super changes Pre 30 June & Post 1 July 2017 Factsheet or have a look at the ATO website.
3 Ways to Save More for Your Super
If you have changed jobs in the past, the chances are you will have multiple super accounts. Combining them into Enterprise Plan means, not only will you save on multiple sets of administration fees, you will also have less paperwork to do, to help you with your retirement planning. Simply complete the Roll-in Form and we will look after the rest. Or, if you are not sure where your super is held, we can help you find them and consolidate with your existing Enterprise Plan account. To find out more, please click here.
Take advantage of the tax concessions and the co-contribution options the government is offering. Make a before tax contributions or after tax contributions to give your retirement a boost.
Provide us with your Tax File Number (TFN) to avoid higher tax on your concessional contributions and on super benefits. It will also make it easier to locate lost super and consolidate your super. If you are not sure if we hold your TFN, give us a call on 1800 816 575, or complete a Change of Details Form available on the Forms & Publications page.