How super works
Find out how your super balance can enable you to live the lifestyle you want when you retire. No matter what industry you work in, super is the pot of gold that you will draw on in your old age. The earlier you start getting on top of your super, the better off you'll be in the long run. Brush up on the basics of how super works, how to choose the right fund for you, and how much you'll really need to lead a comfortable retirement.
Super in a nutshell
Superannuation, or super, has a reputation for being complicated. At the end of the day, it's simply a way of saving for retirement.
Generally, if you're 18 years or over and active in the workforce, a percentage of your salary will be put towards a retirement fund. It doesn’t matter whether you’re full-time, part time, casual or even a temporary resident, your employer should make contributions on your behalf. There are some exceptions (for example, if you're self-employed) and the rules are slightly different if you're under 18.
Super is not deducted from your salary; it's a payment your employer has to make in addition to your salary. If you're self-employed, you can and should pay yourself super.
You are entitled to super contributions from your employer if you're:
- 18 years old or over
If you're under 18, you must be working more than 30 hours a week to receive super contributions.
Your employer is not required to make super contributions if you're:
- paid to do work of a private or domestic nature for 30 hours or less each week
- a non-Australian resident and you’re paid to do work outside Australia
- an Australian resident paid by a non-resident employer for work done outside Australia
- a senior foreign executive on a certain class of visa
- temporarily working in Australia for an overseas employer and are covered by the super provisions of a bilateral social security agreement.
From 1 November 2021, your existing active super account will be ‘stapled’ to you and follow you when you move from job to job. When you start a new job, your employer may need to request your stapled super fund details from the ATO. Your employer will still offer you a choice of fund.
A stapled super fund is as an existing active super account which is linked, or ‘stapled’, to you as an individual employee so that it follows you as you change jobs. This is different to the previous system where you were automatically placed in your new employer’s default fund if you didn't make an active choice.
If you’re eligible, your new employer will offer you a choice of super fund and pay super guarantee contributions into the account you nominate. You can give your employer your current super fund details, choose to join their default fund or not make a choice at all. From 1 November 2021, if you don’t choose a fund, your employer may contact the ATO to request your stapled fund details. The ATO will notify you that a request has been made for your stapled fund details.
If you’re a contractor, you could be treated as an employee for SG purposes. If your employer needs to pay you super but you don’t nominate a fund, they will request your stapled fund from the ATO.
Head to the Super stapling explained page for more information.
Why super matters
When you retire, the money in your super account will become the savings you live off. Having a nice chunk of money in your super fund will enable you to lead your best life.
While it's easy to 'set and forget' your super, it's worth paying attention to it so you can achieve the best possible retirement outcome. Looking after your super can be as simple as comparing different super funds online, choosing a fund with lower fees, and rolling all your funds into one account.
Because your super account is built over your entire working life, it's one of the biggest assets you'll ever have. That means it's much too valuable to take for granted. The earlier you start looking after your super, the better off you'll be in the long run (but it's never too late to boost your super savings).
Types of super
There are five types of super funds in Australia. These include: corporate funds, industry funds, public sector funds, retail funds and self-managed super funds. Industry funds, like Media Super, are run purely to benefit members and profits are returned back into the fund.
Most people have the right to choose their own super fund, although sometimes restrictions apply in enterprise bargaining agreements or individual contracts. Historically, different industry super funds served different industry sectors, but nowadays, you're nearly always able to choose whichever fund you think is right for you.
When comparing different super funds, you should consider things like fees, investment options, performance and service. What you want and need from a super fund may change over the years, and the products and services on offer may change too. It's worth your while to look at how your super fund is performing every 12 months or so, and reassess if it's working for you.
Embracing your super
While it can be easy to feel like your super is invisible and neglect or ignore it, it pays to give it your time and attention. Even though you won't see your super for decades, it's still a steady accumulation of your hard-earned money.
Your super fund invests your money into the investment options you've chosen once they receive your contributions. Each contribution must be at least 11% of your 'ordinary time earnings' – this is called the Super Guarantee – so make a habit of checking how much super your employer is paying you when you get your pay slips.
It's also a good idea to check your super account regularly to make sure you are actually receiving your employer contributions.
Find out what to do if you're not getting the right amount or your employer isn't paying you super at all
After it's invested, your super starts earning returns, which go towards your retirement savings. Different investment mixes can make for different investment returns. That's why paying attention to the investment options on offer by your super fund is a smart move that can boost your balance without you having to do much at all.
It may also be worth combining super accounts* if you have more than one, as many include insurance arrangements with varying premiums, and most have account-keeping fees. Fees are deducted directly from your balance, so the more you pay now, the less you'll have when you retire.
Building your super
It's never too early to start thinking about how you can actively grow your super balance. There are lots of different ways you can build your super while you're still working. Better yet, most of them take just a couple of minutes here and there.
The first step is making sure you're with a low-fee, high-performing fund. Every super fund has a different track record of returns. Look into how your current super fund is performing compared with other funds out there, especially over the long term.
Most super funds offer a variety of pre-made investment mixes or single asset options for those who want to pick and choose. Depending on your age, when you plan to retire and how comfortable you are with risk, you might want to take on a bit more risk in exchange for higher average returns.
Another simple strategy to grow your super is to ask your employer to pay part of your before-tax pay into your super account (also known as salary sacrificing). This enables you to pay less tax while boosting your retirement savings.
You can also make super contributions to yourself at any time. These contributions don't have to be large – every bit counts.
Find out more about making contributions to your super.
Simply put, your super is your money and it deserves your attention. Factoring it into your thinking now can save you time and earn you money over the next few decades.
There is often a gap between how much money people think they need and what they actually need when they retire. The healthier your super balance, the less you'll need to rely on on the Age Pension.
Once you've chosen the super fund that suits you, review your super situation at least once a year to ensure you're on track for the retirement you want. Look at fund performance, account-keeping fees, investment options and any insurance you might have inside your super.
Taking just a few minutes to do this can make a big difference to your super balance. It's never too late to get up to speed on how your super works.
*Before making a decision to combine your superannuation, you should consider any costs, change to insurance cover or loss of benefits that may apply and, if necessary, consult a qualified financial adviser.
We're here to help
We understand managing your super can seem complex. So if you've got questions, we've got the answers.