What is superannuation?

How super works

Whether you’re a full-time, part-time or casual employee, your employer is generally obligated to pay a percentage of your salary into a superannuation account in your name.

After your employer makes super contributions for you, the super fund invests the money. It will accumulate in your super account for the duration of your working life and is typically available for you to access when you retire. It’s essentially like a forced savings for when you retire.

If you’re a sole trader, you are not required to pay the super guarantee, but you can make personal super contributions. Learn more about super for sole traders, opens in new window.

Types of super funds

Depending on your role and industry, you may have the option to choose from:

• Industry funds: you can only join these types of funds if you work in a specific industry, like hospitality or construction. 
• Retail funds: open to everyone with a lot of options to choose from.
• Public sector funds: available to those working in government. 
• Corporate funds: open to people working for a specific company. 
• Self-managed super funds (SMFS): you make the investment decisions for the fund and you're responsible for complying with the super and tax laws.

Choosing a superannuation account 

Most people are eligible to choose their own super fund, but if you don’t specify your choice to your employer, your super will be paid into their nominated super fund. Make sure you ask your new employer for a Superannuation Standard Choice Form if they haven’t given you one when you start working.

If you’re exploring your options for which super fund to choose, here are few things to consider:

1. Types of investment 

Super funds tend to invest in a mix of cash, fixed interest, property, and shares. Most super funds give you the option to choose where your money is invested. It’s a good idea to learn what the different super investment options mean, opens in new window and how they may impact your future. 

2. Investment performance

There’s no guarantee that a fund that’s performed well in the past will continue to do so in the future. That’s why comparing your fund’s performance to another fund over a period of five years will give you a rough idea of what direction you may go.

3. Insurance options

Most super funds include life insurance, and many add total and permanent disability insurance and/or income protection also known as salary continuance. The premiums are deducted automatically from your super balance and can be lower than those outside super. When comparing different insurance options, keep an eye on the rates, amount of cover, and exclusions that may affect your situation.

4. Flexibility

Most super funds offer some flexibility with what you can do with your money. Whether it’s allowing you to move your money into a different super fund or providing you with the option to take part in the first home super saver scheme, flexibility in your super fund is important. 

5. Fees

While all super funds charge fees, it’s good to see how much they charge and how often. Lower fees are preferable, but do funds that have higher fees offer something more? 

What happens if I have multiple superannuation accounts?

You can see all the super funds that are under your name by logging into MyGov, opens in new window. If you do have multiple superannuation accounts across different funds, you might want to consider consolidating as it will make it easier to track your super balance and potentially pay less fees and charges. 

Keeping track of your super

Every so often, you should check your payslips and your superannuation account transaction records to make sure you’re getting the contributions you’re legally entitled to. 

It’s also worthwhile paying attention to how your super fund is performing or whether it’s still the right fund for you. The ATO has a great Super Comparison Tool, opens in new window which can show you how your super fund compares to other funds when it comes to fees and net returns.

Making voluntary contributions to grow your super

One way to grow your super can be by making extra payments yourself. Even small amounts add up over time and may save you money that you pay in tax. Don’t forget that once you make contributions to you super, you won’t be able to access this money until you retire.

• Pre-tax super contributions: you can ask your employer to pay part of your pre-tax salary into your super account (salary sacrificing). These payments, known as concessional contributions, are taxed at a lesser rate than most people’s marginal tax rate.
• After-tax super contributions: you can also make contributions to super from your after-tax pay. These are known as non-concessional contributions as you have already paid tax on this money.