If the ins and outs of superannuation leave you confused, the answers to these frequently asked questions will help you understand the basics.
According to the Association of Superannuation Funds of Australia (ASFA), a couple requires savings of $640,000 if they wish to enjoy a ‘comfortable’ lifestyle in retirement. For a single, the figure is $545,000.
Broadly, contributions are categorised as either concessional or non-concessional.
Concessional contributions are contributions on which an employer or an individual has claimed a tax deduction.
Non-concessional contributions are made from after-tax income. They include many personal contributions and government co-contributions.
Concessional contributions are taxed at 15% within the super fund, with a tax offset available to low income earners. Non-concessional contributions are not taxed within the fund.
If you are over 18, employed, and earn more than $450 per month your employer will contribute 10% of your ordinary time earnings to super. You can further boost your super by:
Age limits and work tests may apply to some types of contribution.
If your super fund allows binding death benefit nominations, you can elect to have your superannuation paid to your legal personal representative. The money will then be distributed as instructed by your Will. Alternatively, you can instruct your fund trustees to pay your death benefit to one or more of your ‘dependents’. Under superannuation law these are:
Without a binding nomination, your super fund’s trustees decide which dependents will receive the death benefit. They will be guided, but are not bound by, any non-binding nomination.
Superannuation remains, for most people, the best vehicle within which to save for their retirement. However, it can be complicated and there are numerous rules to navigate.
That creates challenges, but it also generates opportunities, many of which can add thousands of dollars per year to your retirement income.
The information provided in this article is general in nature only and does not constitute personal financial advice.