The basics
How does super work?
Super is a type of investment designed to help you save for your retirement. Money can be paid in by your employer, by you, your spouse and sometimes even by the Federal Government. Your super fund invests the money in your account for you.
If you are working, your employer is required to contribute at least 9% of your salary1 to your super fund on your behalf - and that can really add up!
To pay for the cost of looking after your super, fees are deducted from your account. And because it's an investment, the Government also takes out some tax. But because the Government wants us to save for retirement, super is not taxed as much as other types of investments. Your super may also provide you with insurance cover in the event of your death or if you become disabled. Payment for that insurance also comes out of your account.
Compulsory contributions + Voluntary contributions + Earnings + Government Co-Contributions - Government taxes - Fees and other costs - Insurance premiums = Your balance
So, money goes in. It changes with investment earnings (which may be positive or negative) and some comes out along the way to pay for the things we explained earlier. Then when you retire, it's there waiting for you.
Super can also help support you and your family if you die or become disabled before retirement, as the amount of money in your super account is generally added to any insurance you are entitled to.
To ensure super is used in retirement and not before, the Government has placed restrictions on when you can access your super benefits.
Super benefits are generally paid when you retire. They may also be paid in the event of your death, if you suffer total and permanent disability, if you are a temporary resident permanently leaving Australia (strict rules apply: refer to www.ato.gov.au for more details), in cases of severe financial hardship or on compassionate grounds (as defined by Government regulations).
You may also receive your benefit before retirement if you:
- have reached your preservation age, and
- take the benefit as a non-commutable income stream (To find out more see our Super Stream Member guide).
Want to know what your preservation age is, click here.