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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.


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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.

AustralianSuper - Pre-mixed, Balanced Super Fund

AustralianSuper - Pre-mixed, Balanced Super Fund

Choose from an extensive range of investment options and enjoy discounted rates on select banking products when you join AustralianSuper.

  • 2019 Finder Awards Winner: Best Super Fund - Balanced
  • Join and consolidate your super with the easy-to-use mobile app
  • Australia's largest industry super fund

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.

Compare Australian super funds

Name Product Past Performance - 1 Year Past Performance - 3 Years Performance - 5 Years Calculated fees p.a. on $50,000 balance
AustralianSuper - Pre-mixed, Balanced option
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.
Virgin Money Super - Lifestage Tracker
Virgin Money Super's Lifestage Tracker invests in a range of different assets in line with your age, reducing your risk as you get older, and has some of the lowest fees in the market.
Sunsuper Lifecycle Balanced
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.
QSuper Lifetime - Aspire 1
QSuper is one of the largest member-owned funds in Australia. The QSuper Lifetime fund adjusts your investments each 7-10 years as you get older, so you're not taking on too much risk.
HESTA Balanced Growth
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.
Spaceship GrowthX
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's Growth X fund invests heavily in Australian and international shares, with a focus on technology stocks. Performance figures and fees supplied by Spaceship, not Chant West.
Australian Catholic Super Lifetime - Grow
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.
Australian Ethical Super Balanced
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.
Aware MySuper Life Cycle Growth
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.

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 . 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 June 2020.

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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