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February 11 2022
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Your superannuation basics

How much do you know about superannuation? Maybe a little or maybe a lot. Either way, we’ve broken it down to help you get your head around it.
Piggy bank with a question mark enclosed in a white circle above Piggy bank with a question mark enclosed in a white circle above

Super is likely to be one of your largest financial assets, so it’s important you understand how it works.

What is Superannuation?

Though mandated by the government, making smart contributions over the course of your life is an investment in your future and could mean the difference between a modest retirement and a comfortable one.

How does superannuation work in Australia?

If you’re 18 years or over and are working in Australia, earning $450 (before tax) or more a month from an employer, you are typically entitled to compulsory superannuation contributions from this employer.

It doesn’t matter whether you’re full-time, part-time, casual, or if you’re a temporary resident of Australia, generally you are eligible for super if you meet these conditions.

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Did you know?

The 2021 Federal Budget included a plan to remove the $450 monthly threshold for compulsory superannuation payments, meaning superannuation would be paid on all earnings. The bill was introduced to parliament in October 2021. It is to be debated on early this year for a 1st July 2022 start date. 

The minimum superannuation your employers must pay is 10% of your ordinary time earnings (OTE) (known as the ‘superannuation guarantee’). Ordinary time earnings (OTE) are what you generally earn for your ordinary hours of work.

I’m under 18 years old, what about me?

If you’re under 18 years, to be entitled to super contributions you must meet the above conditions and work more than 30 hours per week to be entitled to super contributions.

When can I access my super savings?

The purpose of super is to help you put money aside for your future retirement. Everyone can access their super when they turn 65 years, even if they’re still working and haven’t retired. Otherwise, you can withdraw your super:

  • When you reach preservation age – Your preservation age is generally the earliest age you can access your super, and it's calculated based on your date of birth.
  • Under the transition to retirement rules, while continuing to work.

In some circumstances, like severe financial hardship or on compassionate grounds, you may need to access your super early. This is called an early release of super. In these circumstances there are key eligibility requirements that must be met. 

Learn more about early release of super

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Tip: Ready to access your super?

If you need to access your super early, or you’re 65 and ready to access your super, we recommend considering your options and seeking out a licensed financial adviser to help you work out what’s best for you.

There are options as to how you withdraw your superannuation. You can withdraw it all as one lump sum, or on a regular basis like a salary (using an account-based pension). This has the added benefit of having your money continue to work for you as you go. 

Can I add more money to my super?

Whether retirement is some time away or it’s on the horizon, additional contributions* to your super could add up to thousands of dollars later. There are several ways to boost your super, including:

  1. Voluntary contributions (after tax)
  2. Salary sacrifice (before tax)
  3. Government co-contributions (after tax), if eligible
  4. Spouse contributions (after tax)

* The government limits how much you can contribute. If you contribute too much, you may have to pay extra tax. Before making additional contributions, please check out the age restrictions and work test requirement at rest.com.au/facts

To learn more about contributing to your super, click here.

Your super is invested

Unlike a typical savings account, your super is invested in an investment option ranging from conversative to growth. Most funds allow you to choose how you want your super invested within their investment options available.

When deciding on an investment option, it’s important that you consider your age, values, and investment risk tolerance.

If you are a Rest member, we have an Investment Choice Solutions Tool which can recommend how your money held with Rest should be invested.

Get started today

Here at Rest, we have several different investment options to choose from. You can choose from Core Strategy, Structured Options, Sustainable Growth or Member Tailored Options for more control over how your money is invested.

Check out Rest’s investment options

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Tip

Super is a long-term investment that often goes up and down, so it’s important you don’t react too harshly to small drops in your account balance.

How does my super balance grow?

One of the easiest ways to grow your super is through something we like to call compound interest. According to Albert Einstein, compound interest is the eighth wonder of the world.

So, why is it so wonderous? Well, compound interest is when you earn interest on both the money you’ve saved and again on any interest you’ve earned.

In other words, when your employer puts money into your super fund, you earn interest on that money, as well as the interest you’ve previously earned.

So, you are earning interest, on interest; money on money– genius!

Your super doesn’t always earn money – investment returns aren’t the same every year. The market moves through cycles of stability and volatility. Some years the investment returns are lower, and some are higher.

Need a bit more help?

Our team is always here to help you better understand and manage your super. And If you’d like to make sure you’re maximising opportunities and taking the right steps with your super you should check out Rest Advice.

Our team of qualified and professional advisers can help you:

  • get your spare money working harder
  • make the right investment choices
  • secure your own and your family’s financial future with the right insurance, if something should happen to you
  • make the right type of super contributions
  • build a plan to make your retirement dreams come true

Learn more about Rest Advice

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