Australia has a global reputation for having one of the best social welfare and responsibility structures in the world. Part of this includes the superannuation scheme – colloquially known as ‘super’ – which has been compulsory for all Australian employees since 1992.

The idea behind super is to enable workers to put aside enough money so that they are not dependent on social security to pay them a significant pension after their retirement.

Here is a brief overview of how superannuation in Australia works, and how it might benefit you once you move down under.

 

How does the money get paid?

When you get a job in Australia, your employer is automatically required to pay 9.5% of your salary into a superannuation fund. You are able to select the fund, which then invests the money on your behalf.

The amount of super employers are required to pay is scheduled to increase to 12% in coming years, according to the federal government’s MoneySmart website. Government employees are generally entitled to a higher rate of super.

You should ask potential employers whether the proposed salary you are being offered is inclusive of superannuation, so you have a clear picture of how much you will actually take home in wages, and how much will be paid into your super account for retirement.

The superannuation scheme is based on the premise that ideally you will make additional payments as and when you can afford to make them, so that you have a greater amount of money available at retirement age.

 

What are the key advantages of superannuation?

Apart from the obvious advantage that your employer is actually making payments on your behalf, there are generally positive tax implications for money which is being saved through a super fund (usually with a taxation rate of 15%). The superannuation funds are also tax free when they are removed from the account upon your retirement.

If you decide to contribute additional money to your superannuation fund, then the Australian Government may also chip in a co-contribution payment to help top the funds up. It is important to note that the rules on this do change from time to time though.

For many people working in Australia, the best thing about super is the enforced savings regime. Even if you are making additional contributions, except in specific circumstances, you are only entitled to access your superannuation funds when you are over 60 years of age. So if you are known to make poor financial decisions, the super program ensures that you cannot unwisely spend the funds you will need to rely on once you have stopped working!

You can select your superannuation fund based on many different criteria. Although many people simply choose the fund which their employer prefers, depending on your individual circumstances, you may prefer a fund which has low fees, has a specific investment regime for your money, or is otherwise easy to exit if you know you will be leaving Australia again after a certain time.

Many super funds also offer life and trauma insurance policies which you may be eligible for.

 

What happens if you are on a temporary visa?

If you are only on a temporary visa and will be leaving Australia shortly, you will be able to access whatever superannuation funds you accumulated during your time here when you go. Ensure that this is an easy process by checking with your superannuation fund at the time of opening the account.

 

Superannuation in Australia is designed to ensure that all Australian workers have access to sufficient funds when they retire. For more detailed information on how superannuation can work for you, it’s a good idea to seek specialist advice from a financial planner or accountant.

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