Superannuation, or Super, is money which is saved to fund your retirement. It’s usually a long term investment, saved over your working life.
There’s a lot of bad press around super which can make it seem like it’s not worth bothering with or something you worry about in the future. Successive governments just can’t seem to leave it alone but it is still the most tax effective way to save for retirement unless you are already not paying any tax.
Really, though, for most people, super will eventually be one of your largest assets. It’s a way of saving money while paying a lower amount of tax. While the rules do keep changing, it’s still the best legal way to reduce the amount of tax you can pay. Will the rules keep changing? Based on history; yes and we need to stay on top of these changes.
Superannuation is not the investment itself and can be almost anything with the use of SMSF. There are still restrictions which you need to know but you have a huge amount of flexibility. Traditional investments of super funds is broken up by allocating to a range of assets such as: shares, bonds, property and cash. One thing we hear is that “I don’t like investing in super”, well you can’t actually invest in “super”, you invest in assets that are in that tax effective stream of legislation.
Anyone can contribute to your superfund, so long as you are under 65. The most common types of contributions are:
- Employer contributions – this is the minimum amount your employer must pay into your super from your salary (commonly called SG)
- Salary Sacrifice contributions – these are still employer contributions, but they are in addition to the regular SG contributions. You ‘sacrifice’ part of your salary and have it paid to your superannuation fund instead of to you
- Personal contributions – these can be either after tax (called non concessional contributions) or before tax (called concessional contributions). The latter ones allow you to claim a tax deduction for the contribution
There are a few other types of contributions, which we can discuss with you if they are suitable for your personal circumstances.