Superannuation (or super) is a fund specifically designed to help you save and invest for your retirement. It’s restricted as you generally can’t withdraw from super until you retire or reach your preservation age (that’s the intention, although there are special conditions of release). And super funds are set up as trust funds. This means a trustee is appointed to manage the fund on behalf, and for the benefit, of its members. Super receives special tax treatment compared to your other money. When it comes to investing over the long term, there aren’t many better tax-effective ways to save for your retirement. Lower taxes and more investment options – such as local and international shares, property and fixed interest investments – offer your super more potential to grow.
Super is compulsory for employees. Superannuation Guarantee (SG) contributions** were introduced to help us take control of our retirement.
** Deposits into a super fund are called contributions.
Super opens your money to the world of investment markets and you can choose how it is invested. Money in super is taxed in different ways to your other investments. It’s designed to reward you for investing for the long term. Your insurance premiums, which are part of your super contributions, may be paid from your pre-tax salary, which is a tax-effective way to enjoy the protection you and your family need.
Deposits into super are known as ‘contributions’. There are two types of contributions. They can be made from your:
- pre-tax income (concessional contributions) and
- post-tax income (non-concessional contributions).
Generally, concessional contributions (made from pre-tax income) attract a contributions tax of 15%, which can be significantly lower than your marginal tax rate. Tax on non-concessional contributions (made from post-tax income) does not apply. However, there are caps on both these types of contributions which vary depending on your age.