Superannuation and the guarantee rate: Here’s how superannuation works in Australia

Superannuation is a way to save for retirement and is compulsory in Australia. Learn how it works in this guide.

Superannuation is the main way of saving for retirement, and is compulsory in Australia. In the past, people relied on their personal savings in retirement as well as a government support.

What is superannuation?

Superannuation is money that's invested throughout your working life which you can access when you're retired from the workforce, to fund your lifestyle. Superannuation comes with special tax benefits, and is a way of minimising the number of Australians relying on the aged pension in retirement.

The superannuation guarantee rate

The superannuation guarantee rate is the amount of money Australian employers are required to pay all employees towards their superannuation. The current super guarantee is 9.5% of what you earn annually, and this is set to increase gradually over the new few years. This means that your employer must pay at least 9.5% of what you earn into your nominated super fund (they can pay more). Because the super guarantee is a percentage of your earnings this means the more you earn, the more super you'll be paid by your employer.

The superannuation guarantee rate

The superannuation guarantee rate will remain 9.5% until 30th June 2021, after which it will increase to 10% and eventually increase to 12% in July 2025.

What is a superannuation fund?

A super fund is where your superannuation savings are paid into. This includes the super guarantee paid by your employer and any contributions you make yourself. You can choose your own super fund when you first enter the workforce. If you don't elect your own fund, you'll receive your employer's default fund. Your superannuation fund will take the money paid into the fund and invest it on your behalf in a range of shares, property, cash and other assets.

AustralianSuper - Pre-mixed Balanced Super Fund Offer

AustralianSuper - Pre-mixed, Balanced Super Fund

AustralianSuper - Pre-mixed Balanced Super Fund Offer

  • 2019 Finder Awards Winner: Best Super Fund - Balanced
  • Join and consolidate your super with the easy-to-use mobile app
  • Australia's best performing growth fund over 10 years*
*To June 2019, according to Chant West. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
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Compare Australian super funds

Name Product Past Performance - 1 Year Past Performance - 3 Years Past 5 year performance Calculated fees on $50,000 balance
8.67%
10.72%
9.48%
$437.65
The Balanced option is a pre-mixed, MySuper fund that invests in a diversified range of asset classes.
AustralianSuper is an award-winning industry super fund and is the largest super fund in Australia.
8.52%
10.48%
8.9%
$523
The Lifecycle Balanced option is a MySuper product that invests your super in a balanced fund until you’re near retirement.
Earn a Retirement Bonus of up to $4,800 when you open a new Income account. T&Cs apply.
11.03%
9%
9.74%
$395
The Lifetime option is a MySuper product that adjusts your investment mix each 7-10 years as you get older.
QSuper is a member-owned super fund and is one of the largest super funds in Australia.
-1.36%
N/A
N/A
$358
The Lifestage Tracker is a MySuper product that invests in a range of asset classes in line with your age.
Earn Velocity Frequent Flyer Points for making contributions to your super. T&Cs apply.
7.27%
9.06%
7.79%
$598
The LGIA MySuper Lifecycle option aims for higher returns while you’re under 75.
LGIA is a medium-sized, member-owned super fund open to all Australians.
6.03%
N/A
N/A
$573
The LifetimeOne investment option is a MySuper product that changes your investment mix as you get older.
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.
New Fund
New Fund
New Fund
$291.50
The Balanced Essentials fund invests in a range of shares, residential property and other assets and has a medium level of risk.
Superestate focuses on investing your super in physical residential properties and charges some of the lowest annual fees in the market.
7.71%
10.09%
8.3%
$549.42
This MySuper product will invest your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
First State Super is a not-for-profit super fund with more than 750,000 members around Australia.
7.25%
9.58%
8.32%
$548.53
The Core Pool invests in a mix of asset classes and is an authorised MySuper product.
HESTA is an industry super fund open to all Australians and designed for employees in the health and community services sector.
-2.16%
5.03%
5.41%
$643
The MySuper Lifestage fund invests your super in a mix of asset classes depending on how old you are.
Westpac Group customers can manage their super alongside their day-to-day bank accounts.
6.99%
9.9%
9.03%
$565
The Growth fund is a pre-mixed investment portfolio and an approved MySuper product.
Cbus is a leading industry super fund for the building and construction industry, that’s open to all Australians.
4.88%
7.79%
8.03%
$682.65
The MySuper Balanced Growth option is a ready-made, diversified fund with a medium level of risk.
BUSSQ is an industry fund designed for the building and construction industry and open for all Australians.
-1.04%
4%
5.27%
$581.80
The Lifestage Fund readjusts your investment mix every few years to reduce your level of risk as you get older.
A retail super fund that offers access to personalised financial planning and advice.
6.8%
10.8%
9.65%
$546.76
The Balanced fund invests your super in a range of assets and is designed for high long-term growth.
An industry super fund open to all Australians with a focus on the hospitality and retail sector.
7.66%
9.33%
9.03%
$469.76
The Balanced option is a MySuper product that invests in a range of asset classes aiming for medium to high long-term returns.
MTAA is a national super fund available to all Australians with a focus on the motor trades and automotive sector.
N/A
N/A
N/A
$728
The Growth option is a diversified portfolio that aims for high growth over the medium to long term.
MLC is a large retail fund open to all Australians. MLC is the wealth management arm of National Australia Bank.
5.94%
8.57%
7.36%
$497.60
The Core Strategy is a diversified investment portfolio that balances risk and return, and is an authorised MySuper product.
REST is an industry super fund tailored towards the retail sector and open to all Australians with almost two million members.
9.88%
9.97%
9.35%
$361
The Balanced option is a MySuper product that invests in a mix of growth and defensive assets.
A flexible industry super fund for people who work in Australia’s higher education and research sector.

Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at https://www.chantwest.com.au/financial-services-guide . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending December 2018.

Who pays superannuation in Australia?

All Australian employers are required to pay the super guarantee to their employees. Employers need to pay super into their employee's nominated fund at least four times a year. Australians who are self-employed generally are not required by law to pay themselves super, but it’s definitely a wise idea to do so.

There are a few situations where employees are not legally required to pay superannuation, including:

  • If the employee earns less than $450 a month
  • If the employee is under 18 and works less than 30 hours per week
  • If the employee is not an Australian resident and completes the work outside of Australia

Superannuation has a number of benefits

As well as helping fund your lifestyle when you're no longer working, superannuation has a number of additional benefits.

  • You can access cheaper insurance such as life, disability and income protection cover through your super
  • Superannuation is taxed at a lower rate (15%) during the accumulation phase
  • You can choose how you'd like your super to be invested based on your personal values and appetite to risk
  • You can contribute more money to your super to take advantage of the special tax benefits
  • when you retire, you can elect to receive your super in one lump sum payment or in stages

To sum up, superannuation works in the following way:

  • Your employer makes compulsory contributions on your behalf (currently 9.5% of your gross salary) into a super fund that you or your employer nominate.
  • You have the option of making your own contributions as well, and the government may also contribute if you are a low or middle-income earner.
  • Your superannuation fund invests the money on your behalf and it grows steadily over many years, accelerating in the last few years when the sum is greater.
  • You retire from working life and access your super, either in the form of a lump sum payment or as a regular income stream.

Superannuation is very important

Having inadequate funding for your retirement will not only affect your ability to do the things that you always dreamed of doing when you retire, such as travelling, but it can also affect your ability to do basic and necessary things such as paying the bills, buying food and paying day to day living costs. Whilst saving towards your retirement may not seem like an important issue when you are in your twenties or thirties, time quickly passes and many people who think this way suddenly find themselves approaching retirement age with no funding plans in place. This could leave you facing several very bleak decades, with loads of time on your hands but no money to enjoy it.

By ensuring that you focus on saving towards your retirement from a younger age, you can rest easy in the knowledge that the time you have available after retiring from work can be spent relaxing, enjoying life and achieving your goals.

Need some tips to help you choose a super fund? Check out our guide on how to choose a super fund here.

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