Mercy Super - Always for you

What is super?

 

Super is a tax effective way to save for retirement.  Most people have a super account.

 

Why do we need super?

 

Sufficient superannuation ensures that you can live the lifestyle you want when you retire. It ensures that your quality of life in retirement is much the same as when you were fully employed.  It is about being financially empowered and having a choice in retirement. 

 

How does super work?

 

Your employer makes contributions on your behalf over time into a superannuation fund or retirement savings account (RSA) so that when you retire from the workforce, you will be paid this money either as a lump sum or in regular payments, much like an income.   

In Australia it is compulsory for employers to contribute to the superannuation savings of their full time, part time and casual employees who:

1. are under 70 years of age and over 18 years of age;
2. work more than 30 hours a week if you are under 18 years of age; and
3. earn $450 or more in a month. 

 These compulsory employer payments are called Superannuation Guarantee (SG) and are currently set at the equivalent of 9% of your earnings and must be paid into a complying super fund. 

If you are paid under an Award your employer may be required to contribute superannuation at the level stated in the award, regardless of how much you earn and your age.

 

When is the Superannuation Guarantee Paid?

 

From 1 July 2003, your employer is required to make at least quarterly Superannuation Guarantee (SG) payments on your behalf.

Many employers pay the SG more frequently than this, but the due dates for SG contributions are:

1. 28 October (for the September quarter);
2. 28 January (for the December quarter);
3. 28 April (for the March quarter); and
4. 28 July (for the June quarter).

If an employer does not pay the required SG contributions, they will have to pay the Superannuation Guarantee Charge. This is expensive for an employer, as it is not tax deductible. And there is an additional administration charge of $20 per employee plus interest of 10% per annum.

 

How much will I need?

 

The amount of super you will need to save leading up to retirement will depend largely on the level of income you want in retirement and the type of lifestyle you want for your retirement. Once you have determined this then you should be able to calculate what you will need to save, taking into consideration how long it is until your retirement, what savings you already have, what assets you have (do you own your own home?) and any debts you may have.

 

You can also speak to an IFFP Financial Planner about saving for retirement.

 

How is Superannuation Taxed?

 

Superannuation is designed to provide you with an income when you retire or if you become disabled and are unable to work. To help with this, special low rates of tax apply to superannuation contributions and earnings. These rates are:

1. 15% tax on the contributions your employer makes on your behalf;
2. 15% tax on the investment earnings made by the fund; and
3. 15% tax (plus 1.5% Medicare levy) when certain lump sum benefits are withdrawn from the fund. However, from 2007, superannuation benefits received by persons aged 60 and over are not subject to any tax.

If you use your superannuation benefit to receive a regular income from a super fund, special tax concessions apply, including a 15% tax rebate on certain superannuation income received.

 

Concessional contributions cap

 

Concessional contributions are often referred to as pre-tax contributions. They include employer Superannuation Guarantee (SG) payments and any additional

employer super contributions as well as your own voluntary salary sacrifice contributions. These contributions obtain their name as they are taxed at a concessional tax rate of 15%.

 

Please note: Under transitional  arrangements until 30 June 2012, f you are aged 50 or over you will be able to contribute up to $50,000 per year. If you have more than one

fund, all concessional contribution made to all your funds are added together and count towards the cap. Contributions in excess of these amounts will be taxed at the top marginal tax rate.

 

Non-concessional contributions - personal after tax contributions

 

Personal contributions from your after - tax income will not be taxed when contributed. These contributions are limited to $150,000 (to be indexed). If you are under 65 you will be able to bring forward two years contributions and contribute $450,000 (to be indexed).

Your personal (after tax) contributions are not taxed when you withdraw from the fund regardless of your age. For more information visit the Australian Taxation Government  website www.ato.gov.au

 

When Can I get my Money?

 

Because superannuation is about saving for retirement, the Government places restrictions on your ability to withdraw your superannuation benefits before you retire. This is called preservation. Higher tax rates apply to most benefits paid prior to age 55, with the major exceptions being in cases of death or disability.

 

Some temporary residents are able to access their superannuation once they have permanently departed Australia.

 

See our section on Temporary Residents for more information.