What Is a Superannuation?

Answer:
Superannuation is a retirement plan in Australia.

Under this law, employers are required to put an additional amount of money based on the employee’s salary (9% currently), which can be accessed by the employee when they meet certain conditions which are laid out in Schedule 1 of the Superannuation Industry Supervision Regulations of 1994.

Before the Superannuation Guarantee become law in 1992, superannuation arrangement had been common for many years as they were negotiated by labor unions between wage increases. The mandatory system was part of a major reform package which sought to address Australia’s retirement income policies. This was due to the upcoming demographic change that politicians expected age-based pensions to overwhelm the system.

This solution involved “three pillars” to retirement income:
- A safety net of a means-tested Government age-based pension system.
- A private savings plan which is generated through mandatory contributions to superannuation.
- Voluntary savings through superannuation and other investments.

The mandatory contribution by employers was originally set at 3% of the employee’s income, and the Australian government has incrementally increased this amount. Since 2002, this amount has been set at 9% of an employee’s regular pay. This amount is not payable on overtime, but it is payable on things such as bonuses, commissions, and shift differentials. Business groups originally fought against this system. Because of this system, Australians now have more money invested in managed funds per capita than any other nation’s economy. Most of their workers are now indirect investors in the stock market.

The contributions must be made by the employers into the employee’s superannuation fund at least every three months. These contributions are made over the employee’s working life, and the amount of employer and voluntary contributions, plus earnings, is paid to the employee, minus taxes and fees, when they retire. This law applies to all Australians working, with the exception of those earning under $450 per month, that are between 18 and 70. The employee also will receive tax benefits for voluntary contributions.

Superannuation benefits will fall into three categories: preserved benefits, restricted non-preserved benefits, and unrestricted non-preserved benefits. Preserved funds must remain in the fund until the employee reaches age 55. Restricted non-preserved funds can’t be used until an employee meets certain conditions, such as leaving their job. Unrestricted non-preserved funds may be accessed when the worker requests it.