Superannuation

The aim of superannuation, since its introduction by the Keating Government in 1992, is to enable all working Australians to accumulate savings to fund their retirement. The most common means of contributing to super is through employer superannuation guarantee contributions (SGC), which by law, must be paid at a rate of 10.5 per cent from 1 July 2022 and will gradually increase to 12 per cent by 2025.

Australians are encouraged to build their retirement income using favourable tax benefits and many take advantage of these incentives by salary sacrificing to super. This enables an employee to pay an amount of pre-tax salary into their fund, which when taxed at 15 or 30 per cent, is often less than their own marginal tax rate.

Non-concessional contributions to your nest egg can also be made – these come from after-tax income. Other factors, such as age and hours worked, can determine whether an individual can contribute to their retirement savings.

Through investment of contributions by fund trustees, individuals hope to see their nest egg increase by payment of returns on investment and compound interest. As investments can go down as well as up, most people choose a mix of different investment types based on their risk profile.

Super has become a major part of retirement planning and, for many, will eventually constitute their main form of retirement income. Making sense of super in the years before retirement is so important and can be the difference between a happy, secure retirement and one living on the breadline.