When you move to Australia, getting your head around what everyday things are called can be a headache. And when I first heard the word ‘superannuation’, I had absolutely no idea what it could even be.
So if you’ve ever had the thought ‘what is superannuation?’, this post is for you!
In this blog I’ll explain what superannuation is, how it works, and all the other things you need to know about it.
Note: this blog is not intended as financial advice or personalised advice – please consult a qualified financial advisor should you need personalised advice.
What Is Superannuation?
Superannuation is your pension fund.
Similar to a retirement annuity in South Africa, money saved into your superannuation (also shortened to ‘super’) is held in a fund until your retirement age.
You can choose what kind of funds you invest in too. You’ll pay annual or monthly charges for your funds to be managed. And each year you’ll get an annual statement showing the balance and growth over time.
How Does Superannuation Work?
In Australia, your employer is legally obliged to pay a set percentage each month into your superannuation. This is called the super guarantee (SG).
From 1 July 2021 employers must pay 10% of your salary into your super (it was 9.5% previously). You can also make additional contributions of your own regularly or ad hoc throughout the year.
This percentage is planned to increase incrementally over the next few years until it reaches 12% in 2025.
Note: It’s important to check your job offer/contract to determine if your total salary includes this or is on top of the salary you have been offered – look for if it says plus super, or includes super.
How Is Money Paid Into Superannuation?
Employers are required to physically pay your superannuation at least quarterly. They can choose to pay it more often though, e.g. monthly or each pay period.
Many businesses make a lump sum payment to your super each quarter.
Note: It’s important to review your super fund at least quarterly to check that your employer is doing the right thing. Unfortunately, there are many horror stories about employers underpaying super contributions or not paying them at all.
Choosing A Superannuation Fund
You are free to choose any approved superannuation fund.
Some people have multiple superannuation funds.
This is usually because each time you start a new job, you need to complete a form that tells them where to pay the super. If you don’t complete this correctly or in time for your first superannuation payment, they will automatically create new superannuation fund in your name with their preferred fund.
This can mean you end up with multiple small super funds and each of those will have fees and charges. So it can be more cost effective to ensure you have one fund instead of multiple funds.
Personal Contributions To Your Superannuation
Over and above your obligatory employer contributions, you are also able to make your own additional personal contributions, either before tax or after tax.
Some ways to do this are:
Find out more about these options directly on the ATO website linked above.
When Can You Access Your Super Fund?
Like retirement annuities, generally you can only access your super when you reach retirement age.
There are sometimes circumstances when you can access your superannuation prior to retirement.
These can include:
– saving for your first home under the first home super saver scheme
Transferring Your South African Retirement Annuities To Australia
Did you know that you can transfer your retirement annuities from South Africa to Australia?
There are rules surrounding this – the main one being that you have been a tax resident outside of South Africa for at least 3 years (unbroken) and can prove this via a tax registration certificate.
Some people want to put their retirement annuity funds straight back into their Australian superannuation fund. This should be discussed with a financial advisor or tax agent in Australia who can ensure you are informed about how your funds will be treated tax wise when you bring them into the country and should you put them into your super fund.
I work with Rand Rescue, a company that specialises in transferring your cash and retirement policies from South Africa to Australia. If you would like to find out more about getting your retirement annuities in South Africa paid out, you can email me at reeva.cutting@randgroup.biz to discuss your options.
I hope this has helped you to understand a little more about what superannuation is and how it works. Once you get your head around the terminology and rules, it’s fairly straightforward to get set up and start saving for your retirement.
Note: this blog is not intended as financial advice or personalised advice – please consult a qualified financial advisor should you need personalised advice.
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