Pre-1970's, superannuation was only really offered to public servants, defence force and higher paid employees
In 1986, 3% compulsory super payments begin for unionised employees
In 1992, 3% compulsory super guarantee begins for all employees, with set annual increases to rate
In 2002, the super guarantee rate reached its current level of 9%
In 2005, choice of fund becomes mandatory, allowing most employees the choice on which fund to hold their super and make contributions
In 2007, simpler super was introduced to help make managing super and understanding the many super laws a little bit easier. Tax-free income streams introduced
In 2013, the super guarantee rate rises to 9.25%, slated to increase steadily each year until it reaches 12% in 2019
The history of super as a mainstream savings scheme in Australia is still relatively short, with many still fully unaware of exactly what super is and how it works. Let me try and break through some of the confusion and misconceptions to highlight some of the key points regarding Australia's system of superannuation:
- Superannuation is not an investment; it is a trust – an environment. Superannuation does not perform poorly, nor does it perform well. It is simply a way of holding investments so that you can get some good tax breaks, as long as you agree to not touch the money till you get older. Yes, investments within your super will go up or down, but to blame super for either of these outcomes is well off the mark – like blaming the road you drive on if you speed and get into an accident or run out of petrol – it's not the road's fault.
- Tax breaks? Yes, tax breaks. From a tax point of view, super for most is still the most attractive way in which you can invest your money. You can put money into super pre-tax (less contributions tax) and while it's in there, investment income and realised gains are concessionally taxed. Then, and here's the best bit, once you turn 60, you can pretty much say goodbye to ever having to pay any tax on your super investments for the rest of your life (thanks to changes made in 2006). This isn't just savings and extra growth of $1,000 or $5,000 over a lifetime – think more of $100,000 or $200,000.
- What's the catch? You can't touch it! Super is there to help you save for your retirement. The Government gives you such great tax breaks, to avoid having to pay an inadequate state pension in the future. So don't put money into super voluntarily that you may likely need to use before you retire (e.g to purchase home and/or pay-off mortgage, to fund family business, etc).
So enjoy your super, but like with most things, use in moderation. And see your doctor if pain persists.
LBW Financial Services Pty Limited is a Corporate Authorised Representative of Wealthsure Pty Limited (AFSL Lic. No. 238030)
LBW Financial Services Pty Limited is an authorised representative of Wealthsure Pty Ltd, AFSL 238030, ABN 93 097 405 108. The information contained within these articles is of a general nature only. Any rates (tax rates, Centrelink rates, exchange rates, etc) are correct at time of publication and are subject to change. Whilst every care has been taken to ensure the accuracy of the material contained herein at the time of publication, neither the author, authorised representative, nor licensee will bear responsibility or liability for any action taken by any person, persons or organization on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organization should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.