Education

Understanding Super

The essential objective of superannuation is to put aside money during your working life to use when you retire.  Your super grows as regular contributions are made, which are then invested, and coupled with tax concessions and other government benefits, makes super one of the best ways to invest for the long term.

Some super funds may offer life insurance cover, as well as total and permanent disability insurance.

How to join a superannuation fund

In most cases, you join a fund as soon as you're employed.  By law your employer must pay contributions into a super fund of your choice, on your behalf.

There are very few exceptions such as:

• those paid less than $450 per calendar month
  
• employees over 70 years of age
  
• employees under 18 years of age and working 30 hours a week or less
  
• employees employed for domestic or private work for 30 hours a week or less
  
• employees covered by a bilateral super agreement. This is for people working temporarily in some other countries. Contact the ATO for more information about these agreements

You can also ask your employer or the Australian Taxation Office (ATO) Superannuation infoline on 13 10 20 for the detailed rules. www.ato.gov.au

If you're self-employed, you can decide if you want to join and contribute to a fund. If you are not currently employed, or have never been employed, you can still join and contribute to a fund up to age 65.

How much gets paid into super?

Under the 'superannuation guarantee', your employer must provide the equivalent of 9% of your earnings.

For most people,  9% is based on 'ordinary time earnings', which under the law means earnings for your ordinary hours of work. Earnings are defined in more detail in your terms of employment or by your superannuation fund trust deed.

Visit the website of the Australian Taxation Office (ATO) www.ato.gov.au

You or your employer can pay extra money into super at any time. If you're self-employed or not employed, you decide how much to pay in.

What type of fund can you join?

Fund rules control who joins. There are four basic types of funds.

You must join a complying super fund that meets legal standards. The ATO website has a free register of complying super funds.

Check that a fund is a complying fund on the ATO register. www.ato.gov.au

If you don’t choose a superannuation fund, your contributions can be paid into a retirement savings account - a special deposit account with the banks or other deposit-taking institutions. (For amounts of $10,000 or more, you may wish to consider other super arrangements that may provide a greater return over the long term.)

Who controls your super?

Trustees run your fund. By law, they must act honestly and prudently, and make decisions in the best interests of all members.

Trustees hold office under the fund's rules. Often, trustees hire professionals to invest the fund's money and to look after fund assets, membership records and other tasks. They still remain responsible, and if they fail in their duties, courts or government agencies can remove them.

Who regulates the super funds?

Three government agencies regulate and enforce legal standards to protect you and your benefits:

• ASIC regulates what funds tell you and how they abide by company law 
  
• the Australian Prudential Regulation Authority (APRA) regulates how funds operate (except self-managed ones) so that they can meet their obligations to you
  
• the ATO regulates self-managed funds, employer contributions (the superannuation guarantee), co-contributions and superannuation tax rules.
  
• Government agencies don't guarantee your fund's capital or investment earnings.
  

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