Ten Must-know Facts on Superannuation
Here is a handy guide on superannuation rules:
1. Superannuation Guarantee (SG) – Under SG laws, it’s mandatory for employers to contribute to a super fund for each employee. The rate for SG contributions now stands at 9.5%. It makes your concessional contributions cap.
2. Tax on concessional (before-tax) contributions – The employer’s compulsory SG contributions and any before-tax contributions that you make (concessional contributions) are taxed at a maximum of 15% when super contributions are made. If your annual adjusted taxable income is greater than $250,000, concessional contributions get an additional 15% tax.
3. Special tax rate on investment earnings – Applies to earnings on super fund investments too (at less than 15%), but is exempted if a retirement phase pension is drawn from this account.
4. Co-contribution – If you make non-concessional (after-tax) contributions to your super fund, depending on income level, the government may also put some tax-free money into your fund.
5. Contributions caps – Your annual super contributions amount is limited. If the contribution exceeds the limit, and you don’t withdraw the excess, a penalty tax (excess contributions tax) should be paid.
6. Fund choice – Generally, you can choose the super fund you want your employer to contribute to or the employer will choose it.
7. Investment choice – Generally, you can decide how you want your money invested. If not, a default investment option would be considered.
8. Member reporting – Your super fund must send you regular (at least annual) reports on the performances of the fund and your account.
9. Preservation – You generally can’t withdraw your money (or benefits) from the super fund until you retire or after your preservation age; this may differ.
10. Tax-free for over-60s – When you retire on or after 60, you pay no tax on superannuation benefits, unless you’re a long-term public servant. When you receive a super pension in retirement phase (a superannuation income stream) from your super fund, the earnings on the assets that finance your retirement phase pension are exempt from tax, even if you retire before 60.