Understanding super

Superannuation (or as it is commonly called, super) is basically the money you save up as you work, which you can then access when you have retired. The aim is to save enough so that you have a comfortable level of financial security in your retirement. Some of the decisions you make now, such as how much to save and where to invest your super, could have a huge impact on your lifestyle when you retire.

So how does super work?

An easy way to see how your super account works is through the table below:

Money going in or out Description
+ Employer contributions (or Superannuation Guarantee) If you are working, the Government stipulates that your employer must pay a certain amount of money into a complying superannuation fund. For most people this is 9% of their ordinary time earnings (OTE). This is called the Superannuation Guarantee and it is compulsory for employers.
+ Additional contributions

You can top up your super by making additional contributions. There are a couple ways of doing this, click on the links for more information:

+/- Investment returns Super is a long term investment and how you invest within your superannuation fund will help determine your investment returns which could be either positive or negative over the short term. You need to look at your level of comfort with risk to help choose the right investments.
- Fees Fees are charged directly from your account to help manage and administer your funds. If you have more than one super fund, you are probably paying more than one set of management or administration fees, if you consolidate your super, you could stop paying multiple sets of fees
- Tax

Tax in super is designed to encourage you to save for your retirement. Provided that relevant contribution caps are not exceeded;

  • Before tax contributions to super (employer and salary sacrifice) are taxed at 15%
  • After tax contributions to super are not taxed when received by the super fund.
- Insurance premiums When you take out insurance through your super, the premiums are deducted directly from your super. There are a range of types of insurance available to you through super.

Choice of fund

Most people have the ability to choose their super fund, but if you have an industrial agreement or are a member of defined benefit fund you might not have this choice. To find out if you are eligible to choose your super fund, talk to your employer or see the information on the ATO's website about choosing a super fund.

When you start comparing super funds, some things to look at are fees, investment options, performance, insurance offering and customer service. Click here to see IOOF's super offering.