Superannuation

December 10, 2017 Last Updated: October 16, 2021
Justin

Superannuation is a legal requirement in Australia where employees must be paid 10.0% of their salary into a Superannuation fund that employees cannot access until they reach retirement age.

How is Superannuation Calculated?

When jobs are advertised, sometimes superannuation (aka Super) is included as part of the overall package and sometimes it’s in addition/on top of the base salary.

E.g. If the call centre base salary was advertised ex Superannuation for $100,000, an additional 10% ($10,000) must be paid into Superannuation so the employees total employment package is $110,000.

If the $100,000 salary was advertised as a package, it means superannuation is included so the employee’s take-home pay (money they can spend) would be $90,000 and $10,000 would be placed into the Superannuation Fund that cannot be touched until the employee reaches retirement age.

Retirement and Death Ages in Australia

Isn’t this a bright and cheery topic…

In case you are wondering, the retirement age in Australia is:

If you were born between: You can retire at:
1 Jan 1954 and 30 June 1955 66 years
1 July 1955 and December 1956 66 years and 6 months
On or after 1 January 1957 67 Years

The average life expectancy for someone born in Australia in 2021 is 83.64 years however given you’re reading this, I’m guessing you are a little older than 0-1 years old so that’s pretty much irrelevant.

But I guess that’s good news if you recently had a child?

Unfortunately, the link between retirement age and death is a bit bleaker for those of us born earlier. Here are some examples:

Born Between: Life Expectancy (Female) Life Expectancy (Male)
1960 to 1972 74 68
1975 to 1977 77 70
1985 to 1987 79 73
1990 to 1992 80 74
1995 to 1997 81 76
2000 to 2002 83 78

*Source: Australian Life Tables, Australian Government Actuary 

So yes, if you are reading that table correctly and you were born between 1960 and 1972 the government enables you to formally retire and access your Superannuation funds one year before your expected death.

So you’ll have 12 months to spend all that money when you are most likely incapable of doing so due to ill health.

Awesome.

On the plus side, it explains why cruise trips are so popular as everyone is in a hurry to spend their superannuation funds…

 

 

Superannuation is still going up but be careful 

If you thought 10% was generous, Australian Government legislation requires superannuation to increase 0.5% each year until it reaches 12.0% by 2025.

Unfortunately, there have been reports of some employers who pay a package salary (e.g. when superannuation is included) that decided than rather give you the extra percentage as an increase to your package, they are just reducing your take-home pay by the additional superannuation amount (prior to 1 July 2021 it was 9.5%).

In other words, if you were on a $100,000 and you were taking home $90,000 by 2025 your package is still $100,000, you’ll just be getting $88,000 take home pay.

And then there are unscrupulous operators out there that may try and avoid paying Superannuation to employees altogether.

It’s illegal and you should steer well clear of any organisation that isn’t paying it or promising it will be paid later.

If you find yourself in a situation where your employee is not paying Superannuation you can report it directly to the Australian Taxation Office (ATO) here.

If you’d like to learn more about how Superannuation works visit the Australian Tax office website >

What about New Zealand?

The New Zealand superannuation equivalent is known as Kiwi Saver however it operates quite differently.

Employees have the option to opt-in to the program and if they do, they have to contribute either 3%, 4%, 6%, 8% or 10% of their before-tax pay.

The main benefit is if they do opt-in, their employee must also contribute 3%.

You can learn more about on the KiwiSaver website >

More helpful links:

 

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