What is superannuation?
Superannuation is designed to provide money for
one's retirement. When someone starts working
their employer has to pay superannuation
contribution to their chosen fund. Which
currently is 9%of the income. If some one is
self employed they can chose whether to have
superannuation or not. Usually superannuation
funds provide life insurance and income
protection insurance.
What all types of superannuation funds are
there?
There are two basic kinds of superannuation
funds
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 service and age at retirement. Defined
benefit funds are common in the public sector.
They are also used by some large companies.
Who is eligible for employer funded
superannuation?
Your employer has to pay super for you if you
are eligible. To be eligible you must:
be at least 18 years of age and under 70
be paid at least $450 (before tax) in a calendar
month, and
work full time, part-time or on a casual basis.
If you are under 18, you are eligible for
compulsory super guarantee if you work more than
30 hours a week.
If you are eligible for super, your employer
must pay a minimum of 9% of your earnings for
your ordinary hours of work into your super
account. These payments are ‘super guarantee’
payments or ‘employer contributions’. They are
also referred to as ‘concessional
contributions’.
What are the criteria for selecting your
superfund?
Generally, you can choose the super fund you
want your super contributions paid into – making
sure it is a ‘complying’ super fund. A complying
super fund is a fund that meets certain
government rules, known as regulatory
requirements. You need to confirm this with the
trustee of the fund. If you are eligible to
choose a fund, your employer must give you a
Standard choice form so you can make that choice
in writing.
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What is an industry funds?
Set up in the mid-1980 by employer associations
and trade unions. Industry funds were designed
originally to accept superannuation
contributions in accordance with productivity
payments made under industrial awards. In those
days industry funds were only open to people
working in the same industry or under the same
industrial award. Since superannuation Guarantee
was introduced in 1992 , they started running
funds for a broader number of people. Some of
the major industry funds are Cbus, Hesta,
Hostplus, Rest, STA and Uni Super.
What is a retail funds?
Retail superannuation funds are run for profit
by financial institutions such as banks,
financial planning groups and fund managers.
Which fund is better Industry funds, retail
funds or Retirement Saving accounts?
This should be answered by your financial
planner depending upon your circumstance. But a
brief description may help you learn some of the
facts. Industry funds are not for profit funds
where as retails funds are run for profit by
financial institutions. Retail funds usually pay
for advisors to recommend their service, and
fund members will have to bear the cost.
Industry funds usually don’t pay for advisors.
Retail funds have more investment choices
compared to industry funds. In the past fifteen
years only once retails funds outperformed
industry funds in returns for the investors that
is industry funds are a better performer
compared to retail funds. As we always say past
performance is not an indicator of future
performance. But of course past performance
matters when choosing a fund for your super.
Retirement Savings accounts are low risk , low
return funds and most suited for people who
think the earth is flat and they live in 18th
century. The advantage of RSA is that unlike
industry and retail funds they rarely give
negative returns.
What all factors to be considered when
choosing a super fund?
Read the product disclosure statement of the
fund. Get an understanding of how it is run and
who all are the trustees.
Check the past performance of the fund.
Compare their fees.
Compare the insurance options
Compare investment choices they provide and how
important are they for you.
The services they provide to member.
Retirement Savings account, are they super
funds?
Retirement savings accounts are not super funds
but operate under similar rules. Retirement
savings accounts are offered by approved
financial institutions. Just like complying
super funds, they accept super contributions
for, and provide benefits upon retirement,
invalidity or death of, the account holders.
Self managed super funds are they my cup of
tea?
Self managed super funds (also known as DIY
funds) perform the same role as other funds, by
investing contributions and making them
available to members on retirement. The
difference is you would manage many of the
decisions and obligations around your super
yourself. To be viable to meet the cost of
regulatory requirements, it will be a good idea
to go for DIY only if your super has a balance
of 150000 and you earn at least $80000 a year.
Above all you should be good at or well informed
about investment and handling money.
What are concessional and non concessional
Components of superfund? How they are taxed?
Concessional contributions are generally the
contributions your employer makes or you make
and claim as an income tax deduction. Non-concessional
contributions are contributions you make from
your own money. Also known as ‘after-tax’,
‘undeducted’ and ‘personal’ contributions. Non-concessional
(after tax) contributions don’t get taxed on the
way into your super account (tax may apply if
your non-concessional contributions exceed the
non-concessional contribution cap). Concessional
Components include Super guarantee payments ,
any other super contributions your employer
makes for you, including salary sacrifice
contributions, contributions you make and claim
as an income tax deduction. Non Concessional
components include your take-home (net) pay,
your savings, your spouse; that is, money your
spouse pays into your super or the tax-free
portion of any foreign super that you transfer
from overseas to your Australian super account
What are the caps for concessional and non
concessional components of superfund?
concessional cap-. Up to $50,000 (indexed
annually) worth of ‘concessional’ contributions
can be made into your super account each year.
If you go over the concessional contribution
cap, those contributions will be subject to
extra tax. If you are over 50 during a
transitional financial year (2007-08 to 2011-12)
you can contribute up to $100,000 a year in
concessional contributions. Any amount over the
concessional contributions cap will be taxed an
additional 31.5%. The excess will also count
towards your non-concessional cap.
Non-concessional caps - You can make up to
$150,000 a year in non-concessional
contributions (this figure is three times the
concessional cap amount which is currently
$50,000). If you’re under 65 in a financial
year, you have the option of ‘bringing forward’
some of your contributions. Instead of a yearly
cap of $150,000, you can contribute up to
$450,000 over a three-year period – but certain
conditions apply. Any amount over the non-concessional
cap will be taxed at 46.5%.
From where can I get further information
about Superannuation ?
For free financial tips and safety checks,
including superannuation calculators and
information about retirement income products,
help on suspected inadequate, misleading or
deceptive information, or fraud or dishonest
conduct.
visit www.fido.gov.au or
phone 1300 300 630
Australian Prudential Regulatory Authority
If you suspect your super fund is being
mismanaged, or if your employer is not
forwarding your personal super payments to your
super fund.
visit www.apra.gov.au or
phone 1300 13 1060
For information about early release of super on
compassionate grounds, talk to your super fund
first.
For free financial information and seminars,
help on Age Pensions and benefits:
visit www.centrelink.gov.au
phone 13 23 00 or
visit your nearest Centrelink Customer Service
Centre.
Department of Veterans’ Affairs
For information about Service Pensions:
visit www.dva.gov.au or
phone 133 254
Financial Literacy Foundation
Helps Australians improve their financial
knowledge and better manager their money. For
information:
visit www.australia.gov.au/understandingingmoney
or
write to:
Financial Literacy Foundation
The Treasury
Langton Circuit
PARKES ACT 2600
If you have a complaint that you can’t
resolve with your fund, contact the
Superannuation Complaints Tribunal for help by:
visiting www.sct.gov.au or
phoning 1300 884 114
How can I track my lost super ?
For lost super visit the site http://www.ato.gov.au/super/content.asp?doc=/content/33301.htm
. To access the system you will require your
Australian Tax file number, name and date of
birth.
Do I have to pay any tax when I am eligible for
withdrawing my super after the prescribed age?
Super benefits are tax- free if paid from a
taxed source and you are 60 or over. There are
tax consequences for you if you hold super in a
non-complying fund If your only income is your
super from a taxed source and you’re 60 or over,
then you may not need to complete an income tax
return from the 2007–08 financial year. You can
keep your savings in super for as long as you
like, with no compulsory cashing out rules. Your
employer can claim a tax deduction for
contributions they make for you until you turn
75 – any compulsory contributions your employer
makes for you after you turn 75 are also fully
deductible, and changes to the pension assets
test taper rate mean more people are eligible
for government benefits such as the Age Pension
and Service Pension.
How much is super co – contribution by the
Government?
You are eligible for Government co contribution
if you make a personnel contribution by 30th
June each year into a complying superfund or
retirement savings account. For that your total
income should be less than $58980 ( this is 2008
level and will be indexed every year ) .Other
conditions are ten percentage or more of your
total income should be from eligible employment,
running a business or combination of both. You
should be under 71 years of age at the end of
the income year. You do not hold an eligible
temporary resident visa at any time during the
income year.
When can I access my super?
You can access your super when you reach
preservation age and retire or when you turn 65,
even if you haven’t retired. Your preservation
age depends on your date of birth. The following
table will help you work it out.
Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60
Can I withdraw my superannuation if I planned
to leave Australia?
This payment is not available for Australian
permanent residents or New Zealand citizens
because they have the option of retiring in
Australia. If you worked in Australia on an
eligible temporary resident visa, you must wait
until that visa is cancelled or expires before
lodging a claim for superannuation benefits.
For further information visit http://www.immi.gov.au/allforms/superannuation/index.htm
How do I know how much super will be in my
account if only the superannuation guarantee
component goes into my account when I retire?
To get an approximate measure of that please
visit this fido site superannuation calculator
at http://www.asic.gov.au/superchoice
I recently got a phone call from a financial
adviser saying that he can help me get early
access to my superfund if I pay him a fee. Can I
trust him?
You cannot legally gain access to the
‘preserved’ part of your super until you reach
your ‘preservation’ age (ranging from 55 years
old to 60, depending on when you were born).
There are certain exceptions, such as severe
financial hardship or compassionate grounds, but
anybody who otherwise offers you early access to
your super is acting illegally. If you do access
your super early for an illegal reason, you may
be subject to legal action and heavy penalties.
You can contact local fair trading office or
ASIC ( contact details at http://www.scamwatch.gov.au/
)
Is there any complaint resolution process for
the Superannuation Industry?
Superannuation complaints tribunal is an
independent tribunal set up by Commonwealth
Government to deal with complaints about
superannuation funds, annuities and deferred
annuities and Retirement Savings account. More
details are available from the website of
Superannuation Tribunal at http://www.sct.gov.au/
Is there any tax saving tips as far as
superannuation is considered?
Super funds pay tax at a special concessional
rate. Your fund pays 15 percentage taxes on all
employer contributions and if you withdraw this
concessional component after you turn 60 it is
tax free. There are many ways to explore the
possibilities of saving tax through your
superannuation
1. Salary sacrifice – Salary sacrifice is an
arrangement between you and your employer
whereby you agree to forgo an amount of your
salary in exchange for an equal amount of super
contributions. The amount you sacrifice is
automatically taken out of your gross salary by
your employer and placed into your super
account. This has the effect of reducing your
taxable income. This strategy is tax effective
as you pay only 15% contributory tax on any
salary sacrifice amount, which may be less than
the marginal tax you pay for your income.
2. Make a spouse contribution – If your spouse
is not working or has a low income, contributing
to your spouses super will be beneficial. You
could receive a 18% tax offset if you contribute
upto $3000 for your spouse. That is a maximum of
$540 To qualify your spouse should be under 65
years of age. If aged between 65 to 69 have
worked a minimum of 40 hours over a period of
not more than 30 consecutive days in the current
financial year. To receive full offset your
spouse must have an assessable income and
reportable fringe benefits of less than $10800
in the financial year. For part rebate it should
be between $10800 and $13800.
3. Split your super contributions with your
spouse – Contact your financial advisor
4. Get cover through you super fund - Obtaining
life and total and permanent disability
insurance through your super may be cheap,
simpler and more tax effective. Superannuation
funds have much higher bargaining power than
individuals so they get a better insurance deal
in bulk from insurance providers which will be
passed to fund members. More over purchasing
insurance through your super allows you to pay
for insurance out of pre- tax dollars .
5. Minimise capital gains tax when you sell your
business – Ask your financial planner
6. Roll your super into an income stream when
you retire - Ask your financial planner
