Superannuation funds in Australia are a type of investment vehicle that builds up over your lifetime, and is designed to provide money for your retirement. Unlike other investment vehicles, superannuation is perhaps one of the most tax effective means of funding your retirement plans.
Superannuation funds are like a long-term savings plan that can help you live comfortably once you stop working. However there are numerous funds available in Australia, and appropriate research and advice should be taken when selecting the best superannuation fund.
Apart from aiming to increase your retirement savings, it is important to conduct a superannuation comparison to ensure maximum growth of your fund. Those who decide to compare superannuation funds may benefit far more from their contributions compared to those who don’t. So the earlier you start contributing, generally the more benefit you’ll receive.
Australian superannuation funds generally tax much less than similar investments, so your nest egg grows faster over your working life. This is due to the significant benefits offered to individuals from compound interest super funds in Australia can provide. This occurs when you re-invest the interest returns earned on an investment (earning interest on returns), causing it to grow exponentially, like a snowball rolling down a hill.
For example, at 9.25% income-reinvested and remaining in growth investments (long term average of 9.1%) capital will double in about 8 years, in 16 years it will quadruple and in 24 years, it will grow to almost 8 times the original amount. Most financial advisers refer to this as ‘the magic of compound interest’. This may give you a rough idea of how much superannuation you may need to put into your superannuation fund now for a comfortable retirement later in life.
If you’re an employer considering offering salary sacrifice superannuation arrangements to your employees, you may wish to discuss your Australian Superannuation fund options with one of our specialists for superannuation advice. Our Financial advisors can explain how salary sacrifice superannuation options can be arranged with minimal implications to your business.
Australian superannuation funds
For most people, joining an Australian superannuation fund starts when you get a job and your employer starts making superannuation contributions. These contributions are called the superannuation guarantee contributions.
If you’re eligible, your employer should contribute at least 9.25% of your earnings into Australian superannuation. This is proposed to increase over the coming years to 12%.
How old do I have to be to hold a superannuation fund?
Generally speaking, to be eligible you must be under 70 years of age, working on a full-time, part-time or casual basis and paid over $450 (before tax) per month to qualify for Australian Superannuation funds. Super funds in Australia are available if you are under 18 you need to have worked more than 30 hours a week to be eligible.
Self employed superannuation – If you’re self-employed, you can decide if you want to join and contribute to a superanuation fund. Most self-employed people can claim a full tax deduction for contributions they make to their superannuation until age 75.
If you’re not working, such as a mother or father with home duties, or have a low income, your spouse can contribute for you.