Superannuation is a valuable financial asset. For many people, it will be their main source of income during retirement. Understanding how super works is therefore very important.
There are two types of super:
By law, an employer must generally pay super on behalf of eligible employees - these are known as Superannuation Guarantee (SG) contributions. In a Defined Benefit fund an employer meets their SG obligation to you by providing a benefit that is certified by an actuary as having sufficient value to meet its obligations.
Regardless of whether you’re a full-time, part-time or casual employee, or if you’re a temporary resident of Australia, your employer must make SG contributions (or provide a Defined Benefit with its value certified as being sufficient) for you if you are over age 18 and are paid $450 or more (before tax) in a month.
If you’re under 18, you must meet these conditions and work more than 30 hours per week to be entitled to SG contributions.
An employer does not have to make SG contributions for you if you are:
If you are covered by an Award, your employer may be required to pay super for you even if the SG contribution requirements don’t apply to you.
If you’re eligible for SG contributions, for 2015-16 your employer must generally contribute a minimum of 9.5% of your ordinary time earnings up to the maximum contribution base. This minimum will gradually rise to 12% from 1 July 2021. SG contributions are in addition to your salary or wages. For more information on how much your employer has to pay, visit the ATO website.
Generally, your super is preserved, which means it must stay in the super system until you permanently retire after reaching your preservation age, or until you meet another condition of release as allowed by law. Your preservation age will be between 55 and 60 depending on your date of birth. In some cases, you may have some non-preserved super benefits, which you may be able to receive in cash before you retire, although some conditions apply. See accessing your super for more information.