Employee FAQs

• Choosing a fund

  Your choice of fund will be one of the most important decisions you make about your super. Both your employer’s contributions and your own additional voluntary contributions will go into your fund.

  • What is fund choice?

    Most employees are able to choose their own super fund into which compulsory contributions are paid, unless:

    • you are employed under the terms of an Enterprise Agreement that specifies which super fund your superannuation will be paid into.
    • you are a federal or state public sector employee excluded from choice by law or regulations
    • you are in a particular type of defined benefit fund or you have already reached a maximum benefit in that defined benefit scheme.

    If you are not sure what award or industrial agreement, if any, you are covered by, phone the workplace relations department in your state or territory or visit the Fair Work Australia Website here.

    
    

  • How do I choose a fund?

    There are different types of superannuation funds, but they can generally be divided into three groups:

    • Industry super funds, which are run only to benefit members and, on average, have lower fees* than commercial or retail super funds
    • Employer-run funds (corporate funds) which are often subsidised by the employer
    • Commercial or retail super funds (often run by banks or insurance companies) which, on average, charge higher fees than the average Industry SuperFund.*

    *Based on a sample of 16 Industry SuperFunds and a sample of 16 retail super funds as at 31 March 2012 (Source - Research by SuperRatings, commissioned by ISN Pty Ltd ABN 72 158 563 270 Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514.)

    When choosing a superannuation fund, it is important to ensure you choose a fund that meets your needs.

    Some of the factors you should consider are:

    • Does the fund have a good track record?
    • What fees will I be charged?
    • Does the fund pay commissions to financial planners?
    • Does the fund offer a range of investment options?
    • Is the life insurance and disability cover competitively priced?
    • How will the fund help you with decisions about your super?

     

  • How do I choose an Industry SuperFund?

    Whatever your type of work, there is an Industry SuperFund to suit you. In fact, under Super Choice legislation, anyone eligible to choose can consider joining an Industry SuperFund
    

  • What is the difference between investment and fund choice?

    Fund choice

    Refers to which fund type you choose for your employer’s super contributions. You may choose an industry super fund, a retail or commercial super fund, or a corporate super fund set up by your employer. Fee structures among funds vary.

    Investment choice

    Refers to the type of investment mix or risk profile you choose for where your super is invested once you have chosen your fund. You may choose from a conservative investment option, a balanced investment option or a growth investment option, or a mix of options. These funds will consist of varying proportions of holdings of cash, fixed interest securities, shares, property and sometimes higher risk investments, such as infrastructure investments.

    
    

• Super and working

  Your choice of fund will be one of the most important decisions you make about your super. Both your employer’s contributions and your own additional voluntary contributions will go into your fund.

  • How much super should my employer pay?

    Generally, if you earn $450 a month or more and you are aged over 18 and under 70, the law requires your employer to pay super guarantee (SG) of 9 per cent of your ordinary time earnings into a super fund on your behalf.

    Your ordinary time earnings are a component of your gross salary, and include ordinary time pay, shift allowances, commissions, and some bonuses but usually not overtime payments.

    So if your ordinary time earnings are $1,000 a month, your employer contribution to your super fund each month should be $90.

    Ideally, this amount should be paid into your super fund of choice at the same time you receive your pay.

    
    

  • How do I know if my employer is paying my super guarantee (SG) contributions?

    Super funds are obliged to send every member an annual statement of their super account.

    This statement records your account balance at June 30, employer and employee contributions, investment earnings, fees and finally a year-end balance.

    Employers must state on your pay slip how much super is paid, and into which fund it is being directed.

    While many employers pay super contributions into your fund on a regular basis, the law requires only that contributions are paid to the fund quarterly.

    If the employer fails to pay your contributions to your fund, you may not be notified of this until the following year when your fund statement reflects zero contribution received.

    If you are concerned about whether your super contributions are being paid, talk to your employer to ensure he or she has your correct fund details. You can also check with your fund to determine what contributions have been received. Many funds offer website access to your account, which makes checking contributions received very easy.

    If contributions due to have been made are missing, or the amount is below 9 per cent of your pay, raise it with your employer. If unsatisfied with the response, phone the Australian Taxation Office on 13 10 20 for advice.

  • Can I take my super with me when I change jobs?

    Yes, but read this checklist first.

    Retirement benefits

    Some funds, especially defined benefit funds, may limit or reduce what you can transfer. In those circumstances, it may be better to stay in the fund until you retire.

    Insurance benefits

    Make sure you get cover in your new fund before you cancel the insurance your old fund. 

    Costs

    Check termination fees from the old fund and contribution fees into the new one. These come out of your account and reduce your balance. Some products have very large penalty exit fees.

    Employer contributions

    For most people, super will be built up through contributions made by their employers over their working life. But you need to monitor that the correct contributions are paid and that the fees charged are appropriate.

    
    

  • Am I eligible for super if I am a contractor?

    Even if you are a contractor, you might be elegible to recieve super contributions if:

    • You are renumerated wholly or principally for your personal labour* and skills
    • You must perform the contractual work personally, and
    • You are paid by reference to hours worked, rather than for the amount of work performed.

    The above applies even if you quote an Australian Business Number (ABN) in the course of payment for your services.

    * Labour, in this sense, does not mean just physical labour. It includes artistic and mental effort, as well.

    Check with your super fund or the Australian Taxation Office for more details.

  • How safe is my super?

    Your super is held on ‘trust’ by your superannuation fund, which is the ‘trustee’ of your money. This means the trustee must hold that money on your behalf and must always act in your best interests.

    Superannuation is a highly regulated area and super funds must comply with many laws and regulations in handling your super. There are three main regulators who ensure that super funds are complying with those laws: APRA, ASIC and ATO.

    The Australian Prudential Regulation Authority (APRA) regulates the prudential aspects and requirements of the superannuation industry. ‘Prudential’ in this context refers to the principles of safety, sound management and responsibility of holding members’ superannuation, which are directed at safeguarding the assets of members’ super accounts.

    The Australian Securities and Investments Commission (ASIC) regulates the consumer protection and market integrity aspects of super and ensures that disclosures from super funds are not misleading or deceptive.

    The ATO administers the Superannuation Guarantee legislation, superannuation contributions tax (surcharge), reasonable benefit limit system, lost members register, Government co-contributions and SIS Act provisions relating to Self Managed Superannuation Funds.

    Super funds are also required to have detailed fraud management policies and procedures in place to ensure your super stays protected.

    
    

  • How come my 15-year-old gets super?

    A 15 year old could qualify for super payments for many reasons, including through meeting the super guarantee (SG) requirements or via an industrial award or agreement.

    If a person is under 18 and works more than 30 hours in a week and earns $450 or more a month then they qualify for the 9 per cent SG.

    Superannuation has been included in a number of industrial awards since the mid-1980s due to the pioneering effort by trade unions to increase the coverage of superannuation to all employees. Before award super, the majority of workers receiving super were generally public servants or those who worked in management in the private sector. The majority of workers received no super at all. Award super sought to address this inequity. Universal super, via SG, was introduced in 1992.

    Where a person does not meet the criteria for SG payments, such as a 15-year-old only working a few hours a week but who is employed under an award, then they may still receive super via the conditions set out in that award.

    
    

• The 'personal super' alternatives

  You can build your super by making your own contributions to your super fund. This can be done in a number of ways.

  • I’m not working, but can I contribute to super anyway?

    The simple answer is yes, provided you are under 65 years of age.

    These contributions, called non-concessional contributions, may come from your own savings or investments. They do not attract the 15 per cent contributions tax applicable to employer contributions, because tax has already been paid on your savings.

    For those between 65-75, you can contribute to your super by meeting the work test. The test involves working at least 40 hours in 30 consecutive days during a financial year. The test must be undertaken before any contribution can be made.

    The other thing to remember about them is that they are tied up in your super fund until you reach preservation age.

    
    

  • What is super contribution splitting – can I make contributions on behalf of my spouse?

    Super splitting refers to your ability to request that your employer super contributions, including your salary sacrifice contributions, be split between you and your spouse. (A spouse is defined as someone who you are married to or live with on a domestic basis as a couple). It means part of your contribution goes into a separate partner’s super account for his or her benefit.

    To be eligible for this, your spouse must be less than 55 y.o. or be 55-64 y.o. and not retired.

    Couples may regard it fairer that the super contributions received by the main breadwinner, or the higher income earner, are shared with the lower income earning partner, or non-working partner.

    The benefits of splitting super contributions between higher and lower-earning spouses is; that it enables the lower income earning partner to gain ownership of some super; as a couple you could access super earlier if your spouse is eligible for condition of release; and there may be possible tax advantages.

    Apart from fairness, contribution splitting may make property settlements simpler.

    As super balances grow in value to rival the equity in the family home, super has become a property settlement battleground for divorcing couples.

    Splitting contributions creates two separate super accounts – one for each partner in the relationship. It is voluntary and is not offered by all super funds. You can split up to 85 per cent of your employer contributions.

    Talk to your Industry SuperFund for more details or go to www.ato.gov.au.

    
    

• Finding lost super

  • How do I find my lost super?

    In today’s work environment, where many of us change jobs frequently, it is easy to lose track of your accumulated super simply because you are too busy.

    This is particularly the case if several employers have paid super contributions on your behalf into different funds and you have not kept track of where the contributions have gone. If you work casually, part time, move around a lot, change addresses and don’t keep all your super fund statements, it can be difficult to keep a handle on where your super money is.

    The amounts of lost super are not small: a Government press release dated 4 February 2011 stated that the amount of lost super was $18.8 billion. Some of that might be yours.

    If you think you are missing some of your super accounts, phone the ATO’s SuperSeeker on 13 28 65, or visit the ‘super’ page on the ATO website at www.ato.gov.au. The SuperSeeker tool allows you to search the lost members’ register, which holds details of lost super accounts, including the name of the super fund that reported the lost account. With either option, you will need to provide your name, date of birth and tax file number.

    Once you have the name of your lost fund/s make direct contact with it. At this point, reclaiming your super is similar to organising a transfer to consolidate your accounts. You can also ask your super fund to conduct an inquiry using SuperMatch. The maximum time period in which this transfer must occur is 30 days.

    Super funds may also transfer small and inactive super accounts to an eligible rollover fund (ERF). With more than 1.8 million accounts, the largest of these special types of funds is AUSfund, Australia’s Unclaimed Super Fund.

    You can check if they have any of your super by undertaking a super search. You will need to provide your name and date of birth. If they have super for you, they will transfer it to your fund of choice – at no charge.

    Consolidating super accounts

    If you have little bits of super scattered across different accounts with different funds, then it's generally a good idea to combine them all into one account. Combining small or inactive accounts:

    • reduces the risk of becoming a lost member
    • can save you fees and therefore increase your super balance 
    • reduces the risk of paying for multiple insurance policies
    • helps keep track of your super.

    Remember to check for exit fees and insurance benefits.

    Unclaimed monies

    You can also search for other unclaimed money through the Australian Securities and Investments Commission website.

    All other unclaimed monies (bank, insurance, shares etc) can be checked on the Unclaimed Money Register in each state or territory.

    All have online search facilities.

• Growing your super

  • Why should I be concerned about super fees?

    The amount of fees that you pay directly affects your superannuation in two ways:

    • They directly reduce the amount in your super account.
    • They reduce future earnings on your super account.

    It is very important to understand how much you are paying in fees because superannuation is generally a long-term investment and fee differences that might look small can add up to a lot over a number of years.

    For example, if you pay an extra 1 per cent each year in fees, you could lose up to 20 per cent from your retirement benefit over 30 years.
    Assuming an opening balance of $50,000, a salary of $60,000 and an earning rate of 8 per cent per annum, then a management fee of 1 per cent each year (ignoring all other fees) would result in a retirement benefit of $342,000 in 30 years compared with $286,000 if fees are 2 per cent each year. (Calculated using the MoneySmart super calculator)

    Industry SuperFunds charge low fees. For instance, most Industry SuperFunds typically only charge a fixed administration fee (for instance $1.50 a week) and an investment management fee.

    The types of fees typically charged by retail superannuation funds include contribution fees (can be up to 5 per cent), an adviser fee, an administration fee and a management fee. Fees that are charged on a percentage basis will increase in dollar terms as your fund grows.

    All funds are required to report the amount of fees that they have charged you, in dollar terms, on your annual statement.  

  • I have several super accounts, how can I combine them?

    Changing jobs can make it hard to keep tabs on your super. It can mean that you can have several super accounts.

    Each account means you pay fees, such as administration, death and TPD insurance costs.

    Ideally, having only one fund to house your entire super, and, therefore, paying one lot of fees and one lot of insurance cover, is the most efficient way of keeping track of your super. It also may be the best way to maximise your benefit.

    Consolidating your super into one account is not difficult:

    • contact your chosen fund and tell it that you want to consolidate your super. (You may be asked to complete a rollover form).
    • ask if there are any fees involved in the rollover.
    • contact the current fund from which you wish to transfer your accumulated benefit, and provide them with the details of your rollover fund.

    Make sure your new employer is paying into your chosen fund. If they are not, ask them for a 'Standard Choice Form'.

    If you hit a roadblock with this process, ask your current fund to assist. And if you are really unhappy with the lack of progress, you can make a complaint, in writing, to the Superannuation Complaints Tribunal. This costs nothing, but it can only be made after you have made a written complaint to the fund that has failed to move your funds, as requested by you. You can get more information on the complaints process at www.sct.gov.au.

    Once this is done, when you join a new employer or pick up another casual job, tell that employer that you want your super contributions directed to your chosen fund.

    Warning – Be aware of fees, fund portability and level of insurance cover

    Fees – check before you move, as some funds charge a fee when you exit. Ask your fund if a penalty fee or transfer fee applies, and ask for your account balance and the surrender value. You should also check the cost of on-going fees with your new fund. If there is a difference between the two contact your fund immediately.

    Portability – moving super funds. If you have made the decision to move super funds, make sure the fund you want to go to will take your contributions. Speak with your super fund(s) for more information.

    Insurance - ensure you have an adequate level of insurance cover.

  • How much can I contribute to super?

    This depends on your age and whether the contributions to your super fund attract tax concessions or not.

    Concessional contributions

    An employer, or in certain circumstances the contributor, can claim this type of contribution as a tax deduction. You pay a 15 per cent tax on these contributions.

    A cap of $25,000 a year generally applies to concessional contributions (i.e. employer and salary sacrifice contributions). The concessional contributions cap for the 2012/13 year (1 July 2012 to 30 June 2013) is $25,000 for all age groups. However, the Government has announced that from 1 July 2014 for persons aged 50 or over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under the general concessions cap. A total of $50,000.

    Contributions in excess of these amounts will be taxed at an additional 31.5 per cent. The excess concessional contributions will then also count towards the non-concessional cap.

    Employers are not required to make SG contributions for anyone aged over 74.

    Non-concessional contributions

    This type of contribution comes from your after-tax pay. No tax deductions are claimed on these amounts and there is no 15 per cent tax payable on these contributions.

    A cap of $150,000 a year applies to non-concessional contributions.

    Up to and including the financial year that a person is age 64 on the 1st July, 'averaging' provisions can be used, i.e. two years contributions can be brought forward to accommodate a larger one-off payment of up to $450,000 combined for a three-year period. NOTE: A person born on 1st July cannot use the 'averaging' provisions in the financial year they turn age 65. Also, if the contribution is to be made after attaining age 65, the work test must be met.

    If you are aged 65 to 74 a yearly contributions cap of $150,000 applies, provided you meet the work test.

    The work test requires that you work 40 hours in 30 consecutive days during the financial year.

    Any contributions above the non-concessional cap are subject to tax at 46.5 per cent.

    
    

  • Should I sacrifice salary into super?

    Super offers considerable tax advantages as a form of saving if your marginal tax rate is above the superannuation contributions tax rate of 15 per cent.

    If you are earning more income than you need at present, or are in a high marginal tax bracket, you can obtain a tax advantage by sacrificing a portion of your salary into super. It means you forgo pay in your hand now for a higher retirement benefit later.

    So instead of paying your marginal tax rate, you can sacrifice pay now and pay tax at the rate of only 15 per cent on that sacrificed amount. Your employer pays the sacrificed portion of your pay into your chosen fund and your take-home pay drops accordingly.

    However, you should remember that super locks your money up until you are at least 55 years of age. Sacrificed pay is similarly locked up. You can only get access to your employer-funded super money before you reach preservation age in exceptional and very restricted circumstances.

    How salary sacrifice works

    You can arrange for your employer to make additional pre-tax contributions for you. This is an effective means of increasing retirement savings for those people who earn more than $37,000 a year, because of the tax effectiveness of super:

    Example

    Bill earns $75,000 a year and has living expenses of $45,000 a year. How much can he save towards his retirement without a salary sacrifice arrangement?

    Salary	$75,000
    Less tax	$16,050
    Less Medicare levy	$1125
    Take-home pay	$57,825
    Less living	$45,000
    Total towards retirement without salary sacrifice	$12,825

     

    Bill goes to his employer who agrees to make additional (salary sacrifice) contributions to Bill’s super fund. Bill requests additional contributions of $19,419 are made. His salary drops to $55,581 and the effect on his take-home pay and savings is as follows

    Salary	$55,581
    Less tax	$9,748
    Less Medicare levy	$834
    Take-home pay	$45,000
    Less living expenses	$45,000
    Plus super contribution	$19,419
    Less tax on super	$2,913
    Total towards retirement with salary sacrifice	$16,506

     

    By entering into the salary sacrifice arrangement Bill can save an additional $3,681 a year towards his retirement.

    Note: The above calculations are based on 2010/2011 tax rates.

    Warning

    Your employer may drop its SG contributions to your super fund based on the new lower salary. Therefore, you should enter into a written agreement with your employer specifiying your ordinary salary before proceeding. Should you have doubts, seek specific advice.

    
    

  • What is the effect of compounding interest on my super contributions?

    Compounding refers to the process whereby interest on earnings is applied not just to the original amount invested, but also progressively to the interest or earnings on that investment.

    So, if an amount invested earned 10 per cent in the first year and the original amount, together with the 10 per cent earned interest, is invested and earned another 10 per cent in the second year, the compound interest earned would be 21 per cent of the original amount over the two-year period. Over many years, the effects of compounding can be substantial.

    Example

    If an amount was invested and earned an annual interest rate of 8 per cent and all of the earnings were re-invested every year, then the original amount would have almost doubled in nine years, would be almost four times greater in 18 years, and almost eight times the original amount after 27* years.

    Of course, the final impact of compounding is affected by how long the investment is maintained and the amount of interest that investment earns and whether the interest is earned daily, monthly or yearly.

    Money contributed to superannuation is designed to provide an income in retirement; and due to compounding interest, the amount can grow many times.

    Amount - $50,000
    Annual interest rate – 8 per cent

    Years	Compounded daily	Compounded monthly	Compounded yearly
    9	$102,714	$102,477	$99,950
    18	$211,001	$210,029	$199,801
    27	$433,454	$430,460	$399,403

    The earlier you start saving for retirement the longer compound interest can work in your favour.

    *Fees and taxes deducted from your super balance are not reflected in this calculation.

    
    

  • What is super co-contribution and how do I get it?

    Super co-contribution refers to the Federal Government topping up your own voluntary contributions to your super fund. The Government pays it to your super account if you have made a voluntary contribution and your assessable income plus reportable fringe benefits plus salary sacrificed to superannuation (income) is less than $61,920 (2009/2010) a year.

    Under the co-contribution scheme, the government contributes $1 for each $1 you contribute to super from your after-tax pay to a maximum of $1,000* in a year.

    To get the full co-contribution amount you must contribute $1,000 of your money into the fund and your income must be less than $31,920 (2009/2010) a year. The co-contribution is payable at reduced rates if your income is between $31,920 and $61,920 in a year. It cuts out at $61,920.

    To be eligible you must be less than 71 years of age and working at least part time.

    Find out how much co-contribution you are entitled to at the ATO website – click on the individual link and then click on super co-contributions.

    You do not need to apply for the super co-contribution. All you need to do is make a personal super contribution to your super fund and lodge a tax return.

    The ATO will use the information in your income tax return and contribution information to work out whether you are eligible. If you are, it will automatically calculate the co-contribution amount and deposit it in your super account.

    The co-contribution will be paid into the super fund in which you pay your contribution, providing that fund will accept the co-contribution. Most funds will.

    
    

  • Should I borrow to put money into super?

    Before you borrow any money from anyone you should carefully consider how much interest you will pay, whether you can afford to pay it and whether it is worth borrowing that amount of money at that cost for the expected return.

    Borrowing money for investment is only worthwhile if the bottom line of the borrowing produces a higher investment return than the costs involved. You should also look at whether it is worth the strain on your budget.

    The same consideration applies to borrowing to put additional funds into super.

    Moreover, you need to be aware that the interest cost of borrowing to put additional funds into super is not tax deductible. This is in contrast to borrowing for other forms of investment, such as buying shares or investment property, where the cost of the borrowing is tax deductible.

    If you do borrow to put additional money into super (to, for instance, obtain the Federal Government’s co-contribution to super available to low and middle-income earners who put additional money into super), you should only do so if the borrowing is for a short time before it can be repaid from the tax-free benefit received from withdrawing lump sum or income stream from your super fund, once you reach preservation age.

    If you are well below 60 years of age you need to assess carefully whether it is worth carrying extra debt to get the co-contribution, as you cannot get your money out of super until you reach preservation age and can retire without incurring tax penalties.

    
    

  • What are the tax limits on super contributions?

    Superannuation is a tax-effective way to save for retirement. Consider your options.

    Some quick tax facts:

    • Contributions made to super out of after-tax income are capped at $150,000 a year. For people under age 65, the cap is $450,000 over a three-year period if more than $150,000 is contributed in the first year of the three-year period.
    • Contributions made out of pre-tax income (salary sacrifice) are capped at $25,000 a year. For those over age 50, there is a transitional limit of $50,000 per year until 30 June 2012.
    • Both pre-tax and after-tax contributions limits are indexed annually. The transitional arrangement of $50,000 is not indexed.
    • Superannuation funds pay 15 per cent tax on income generated inside the fund and 15 per cent up front on pre-tax contributions. There’s no tax on after-tax contributions.
    • There is no tax payable on the earnings once a fund has been converted to a Super Income Stream.
    • The minimum drawings from a superannuation income stream are 4 per cent for anyone aged between 55 and 64, and 5 per cent for anyone aged between 65 and 74 years. For 2011/2012 these minimums can be reduced by 25%.
    • Upon retirement, people who are age 60 or over can access their superannuation savings tax-free.
    • The top marginal tax rate outside super is 45 per cent plus the Medicare levy.
    • The 30 per cent rate – the top rate for the bulk of the working population – applies between $37,000 and $80,000.

    The above information is based on 2011/2012 tax rates.

    
    

• Your money and retirement

  • When can I access my super?

    Superannuation balances are preserved, which means they must remain in the superannuation system and be accessed only when you have satisfied a condition of release.

    While an individual can retire at any time, they usually cannot access their superannuation balances until they have retired and reached their preservation age.

    An individual’s preservation age depends on when they were born.

    Knowing your preservation age: (Note: Preservation age is not the same as Pension age. Pension age is when you become eligible for the Government Pension benefits depending on your income and assets.)

    Date of birth	Preservation age
    Before July 1, 1960	55
    July 1, 1960 – June 30, 1961	56
    July 1, 1961 – June 30, 1962	57
    July 1, 1962 – June 30, 1963	58
    July 1, 1963 – June 30, 1964	59
    After June 30, 1964	60

    
    

  • How much do I really need to retire?

    There is no single answer because it depends largely on your lifestyle in retirement and how old you are when you retire.

    If you retire close to normal retirement age – 65 for men and 63 for women – you will generally need less to retire on than if you retire earlier.

    If you are still paying off your home loan when retired or have children living at home, you will need more money to retire on than if you had paid off the home loan and have no dependants.

    We are living longer than our parents and therefore, we need to make arrangements for the average retirement stretching until 83 if male and 87 if female.

    How will my expenses change during retirement assuming I’ve paid off the mortgage?

    You may spend less on:

    • transport costs to and from work
    • work-related expenses such as clothing and lunches
    • food and utilities as dependents move out
    • home loan repayments.

    You may spend the same on:

    • personal care
    • entertainment.

    You may spend more on:

    • health and dental care
    • home maintenance
    • a new car
    • sports club membership
    • travel for holidays and to see family members.

    To more accurately estimate how much you will need, start by recording what you spend now and adjust it for retirement.

    The Association of Super Funds Australia estimates that as of the December quarter 2009, if you own your own home outright and are relatively healthy, a retired couple would currently need $51,727 per year in retirement to be comfortable, while a couple living a modest lifestyle would require $28,080. A single comfortable retirement comes in at $38,611 per year, while a modest lifestyle for a single person is budgeted at $19,996. See the Westpac-ASFA Retirement Standard available at Association of Super Funds of Australia

  • I have reached preservation age and am still working – can I access my super?

    You may be able to access your superannuation under the Government’s Transition to Retirement (TTR) provisions. These measures encourage middle-aged and older workers to remain in the workforce, even if on a reduced working hours basis, and recognise that they may want to top up their reduced pay from their shorter working hours with money from their accumulated super. However, there is no requirement to reduce working hours to access TTR.

    Under TTR, you are able to draw down an income stream from your super (but not a lump sum) and at the same time continue to contribute to super from your wage or salary, via salary sacrifice, to build up wealth for retirement or to scale down your working hours without reducing your living standards.

    There may be tax advantages to you in opting to salary sacrifice.

    How TTR works is that if you are eligible (i.e. reaching preservation age), you will be able to roll over (transfer) your superannuation savings into what is called a “Super Income Stream” while salary sacrificing your income into super. However, as you are still working, the Super Income Stream will be Non-commutable, (i.e. you can’t make lump sum withdrawal).

    The minimum amount of drawdown each year is restricted, but is also variable and depends on your age. Your fund will be able to advise you on how much you can withdraw if you are 55 compared to when you are, say, 60.

    Access to lump sums from your super remains conditional on you retiring from the workforce other than for any unrestricted non-preserved benefits in your super account. You may however be subject to tax and there may be an adverse impact on certain tax offsets and governments benefits (e.g. Family Tax Benefits and Government co-contribution) if under age 60.

    
    

  • When can super benefits be paid?

    You can generally take your benefits out of superannuation once you reach preservation age and have retired, have reached 65 years of age or satisfy a condition of release.

    Preservation age is increasing gradually from 55 to 60 between the years 2015 and 2025. Once a person is aged 65 or more, they can take their superannuation even if they have not retired.

    
    

  • How can I access my super before retirement?

    Super is your deferred pay invested for your retirement and therefore early access is highly restricted and difficult. Although, if you have any unrestricted non-preserved benefits these can be accessed at any time.

    You can access what are called preserved lump sum benefits – the bulk of your super – when you reach preservation age on the condition that you retire.

    If you have reached preservation age and are still working you can also sacrifice pay into your super fund and draw down an income stream from your super to top up your reduced take-home pay. This may provide a tax advantage.

    A preserved benefit refers to benefits built up after 1983 from employer contributions and any of your own contributions since 1999.

    If you face an emergency, you may be able to access up to $10,000 of lump sum preserved benefits before preservation age. However, you must first satisfy a strict test.

    To satisfy this test you must be in receipt of a Commonwealth income support payment for at least a continuous 26-week period.

    You must also satisfy the trustee of the fund that you are unable to meet reasonable living expenses.

    You will need a letter confirming this from Centrelink or the Department of Veterans’ Affairs.

    There are also compassionate grounds for early release, such as needing funds to pay for home modifications if you suffer from a terminal illness or disability. A considerable amount of documentation is required.

    Applications for release on compassionate grounds must be referred to the Australian Prudential Regulation Authority. Those who promise early access to super should be shunned as you are likely to have to pay marginal tax on the withdrawal, as well as penalties if you enter into such a scheme.

    In a small minority of cases, some super can be legally accessed earlier. Ask your fund about these.

    
    

  • Is there an age when benefits must be taken?

    You can keep your benefits in your superannuation accumulation fund indefinitely, taking as little or as much of your benefits as you choose.

    If you choose to take your benefits in pension form, then earnings within the pension phase are tax-free. Earnings within the superannuation accumulation phase are subject to tax as assessable income of the fund at 15 per cent.

    
    

• Seeking financial advice

  • What do I need to consider when looking for a financial planner?

    A good financial planner will be able to answer these questions promptly and listen to any concerns that you may have:

    • How long have you been giving formal advice and what are your qualifications and period of study?
    • Do you get paid any commissions, or other financial benefits for recommending products or super funds to me?
    • Are there any financial products or super funds that you don’t recommend and why?
    • How much will this advice cost me? Do you offer a fee-for-service option or only charge commissions or percentage-based fees?
    • How do you keep up to date with financial news and changes, including legislative changes?
    • Who are you or your firm licensed through? If this is a major retail financial services company or bank, will this influence the advice I receive from you?
    • Do you have indemnity insurance?

    And remember:

    • Contact your Industry SuperFunds for referrals to a fee-for-service based financial planner.
    • Don’t be afraid to ask questions.
    • If it sounds too good to be true, it probably is.
    • Know your own mind and your own goals.
    • Consider your risk appetite.
    • Don’t agree to anything you don’t understand.
    • Don’t allow yourself to be rushed.
    • Don’t be afraid to say ‘no’ – you are paying for the service.
    • Don’t hesitate to meet with a number of different planners.
    • Get your plan in writing.

    
    

  • How much can I expect to pay for financial advice?

    Financial adviser fees vary greatly. At retirement, if a member uses a ‘true fee-for-service’ financial adviser, they can expect to pay between $2000 to $3000 for initial advice and implementation. Ongoing advice would be on a $-an-hour-basis, as required.
    If you use a commission-based adviser, you would expect to pay between $1000 to $3000 as a plan fee, and between 1 per cent to 4 per cent of sums invested as implementation or initial commission.

    Using a $500,000 portfolio as an example, expect to pay $2000 for initial advice and $10,000 in initial commissions. (Many advisers discount with larger balances).

    
    

• Protecting your income

  Super is for your retirement but it also provides low-cost and tax-effective life insurance and permanent disability cover in the event of untimely death or disablement before you retire. Super funds also generally offer income protection cover.

  • How do I know if my super fund offers insurance?

    Insurance within a superannuation fund provides a number of important benefits for members and forms a key part of the delivery of financial security for members and their dependents.

    Due to their purchasing power and economies of scale, funds are able to purchase insurance cover in the market place with premium rates, service levels, terms and conditions that are generally superior to what individual members can purchase in their own right.

    Because most funds can secure a level of Automatic Acceptance Levels under a group contract, members can generally be provided with a minimum level of insurance cover regardless of their medical history or pre-existing conditions.

    Types of insurance available

    • Life insurance – provides a lump sum benefit to your family at the time of your death.
    • Total and Permanent Disability Insurance – provides a lump sum payment if you are totally and permanently disabled before you reach retirement age.
    • Income Protection – can provide a monthly benefit generally of up to 75 per cent of your normal income in the event of disability and your inability to work.

    
    

  • How much life insurance should I have through my super account?

    There is no magic formula. It depends on your individual situation.

    The amount of cover you will need depends on whether you are the main income earner, how much debt you have and the level of income you need to replace if you die suddenly and have dependants.
    If you are young, single and have no debts, you may need very little insurance; however, permanent disablement could see you fully reliant on social security.

    However, if you have a big mortgage, dependant children and your income is vital to the family, your insurance cover needs to reflect this.

    If you are near retirement, your home loan is paid off, the children are no longer dependant and the amount of your super benefit accumulates, the amount of death cover required will drop. Many funds stop providing death cover when you reach 65 years of age, or retire.

    A common formula for those with dependant children, but who will be dependant for only a few more years, is to insure for an amount that will provide you with enough money to repay your debt (mortgage, car loan and credit card balances) plus seven years of income.

    For those with young families, another formula is to aim for a figure that amounts to 20-times your annual income. An alternative formula is insuring for enough to pay debt, plus seven years’ gross income, plus another year for each child aged under 18.

    
    

  • What happens to my super if I die?

    Dependants

    If you die while a fund member, the trustee must normally pay your life insurance benefit – the amount payable is typically your accumulated superannuation savings plus insurance benefit, which might be fixed and depends on age – to one or more of your dependants or your estate.

    Under superannuation law, ‘dependants’ means your spouse (whether of a same sex or a different sex or de facto), children (of any age), people with whom you had an ‘interdependent’ relationship or those who depend on you financially.

    However, for tax purposes, ‘dependants’ means your spouse (whether of a same sex or a different sex), children under 18, people with whom you had an ‘interdependent’ relationship or those who depend on you financially.

    Benefit paid to “tax” dependants will be tax-free while benefits pay to non-tax dependants, such as adult children, may be taxed.

    Nominations

    Most funds let you nominate who you want your death benefit paid to, either as a ‘non-binding’ or ‘binding’ nomination.

    A non-binding nomination just guides the trustee, who still has the final say, especially if you have dependants but you nominate someone who doesn’t depend on you. The trustee is not required to follow the instructions in your will.

    A binding nomination will bind the trustee, and lets you name a dependant, or a legal personal representative, who must distribute your benefit according to your will; or according to law if you have no will.

    WARNING: Keep your nominations up to date.

    Keep these nominations up to date, especially if you marry, re-marry or have children. You will be asked to update or confirm these nominations every three years.

    If I still want more information, who do I contact?

    If you are not sure about which Industry SuperFund you should join, click here to learn more about the funds that carry the Industry SuperFund' symbol.

Technical advice provided by Industry Fund Financial Planning.