What is Superannuation?

Superannuation, or super as is called informally, is a long-term saving arrangement to assist individuals in saving money for their retirement. It thus makes them self reliant and not totally dependent on the government pension plans.

It is regulated by three main authorities in Australia:

1.  Australian Tax Office (ATO)
2.  Australian Securities & Investments Commission (ASIC)
3.  Australian Prudential Regulation Authority (APRA)

What is Superannuation contribution?
When a certain amount of money is placed into superannuation, it is called ‘contribution’.

Types of contribution

1.  Concessional contribution
This is paid using income before tax. Concessional contribution includes contribution by employer, salary sacrifice contribution and other contributions on which the member has claimed tax deduction.

2.  Non-Concessional contribution
These are the ‘after tax’ contributions which a member can choose to personally pay into the super fund. These are the tax free contributions and so the member cannot avail tax deduction on the same.

Contribution Splitting

Members, as super rules permit, can split contribution among themselves and their spouse. They can do this by transferring certain contribution to their spouse’s account.

This rule is beneficial to the female workers as they tend to have restricted work patterns than male workers.

At most, 85 percent of the concessional contribution left after tax can be splitted by transferring to spouse’s account. The amount transferred is a ‘rollover’ and contributions so that cannot be double taxed in the hands of recipient.

After contributions are accumulated in super fund, they are invested on behalf of the members. The benefit from these investments are paid into the account of each member and can be withdrawn when the member stands eligible.

All super funds are managed by one or more ‘trustees.’ In self-managed super fund (SMSF), the trustees are members, looking after their retirement money under their supervision.

The basic idea of superannuation is to make saving compulsory. The amount paid into super fund cannot be withdrawn except in special circumstances. By restricting withdrawing, the amount is made available only to the member on retirement.

Want to know more about SMSF? Contact our experts on 1300 707 326 or [email protected]today.