Superannuation
Australia's compulsory retirement savings system, where money is locked away and taxed at concessional rates.
Superannuation is money set aside during your working life to fund retirement. Employers must contribute a percentage of your earnings, and the money is held in a fund you generally cannot touch until you reach preservation age.
The appeal is the tax treatment. Contributions made from pre-tax income are taxed at 15% rather than your marginal rate, earnings inside the fund are taxed at 15% rather than your rate, and in retirement phase both can fall to zero.
The cost is access. Super is preserved, meaning it is unavailable until you meet a condition of release. For younger workers that can be decades away, which is the trade-off for the concessional tax treatment.
Why the tax rate matters so much
A dollar of salary taxed at 37% leaves 63 cents. The same dollar contributed to super as a concessional contribution leaves 85 cents — a 35% head start before a single dollar of investment return.
The bit people get wrong
Having multiple super accounts from different jobs means paying multiple sets of fees and often duplicate insurance premiums, quietly eroding the balance. Consolidating is usually one of the highest-return administrative tasks available.
Common questions
Can I access my super early?
Only in limited circumstances such as severe financial hardship, compassionate grounds, terminal illness, or permanent incapacity. Schemes promising early access outside these rules are almost always illegal.
What happens to my super if I change jobs?
It stays in your existing fund unless you choose otherwise. Under stapling rules, your fund generally follows you to a new employer rather than a new account being opened.
Do I pay tax on super in retirement?
For most people aged 60 and over drawing from a taxed fund, withdrawals are tax-free. Earnings in retirement phase are also generally untaxed up to the transfer balance cap.
Run your own numbers
Related terms
Source: Australian Taxation Office