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Superannuation - Australia

   Superannuation

  1. Super Annuation or Super (Both are the same)

Meaning:

  1. Superannuation is money put aside by your employer over your Employment.

  2. You can withdraw your Superannuation money only in certain circumstances – 

For example, when you retire or when you turn 65 years old.

  1. Eligibility to determine Super Annuation when you received salary and wages, Not when the income is earned.

  2. Super Annuation is compulsory for all Resident Australian & Working using TFN & Who earns more than $ 450 per Month

  3. Minimum superannuation contribution is required to be made by the employer. For FY 21-22 10 % of the ordinary Time Earning OTE. This is called Super guarantee (SG)

Superannuation Guarantee Rate (SG) 

FY 20-21

9.5%

FY 21-22

10%

FY 22-23

10.5%

FY 23-24

11%

  1. Ordinary Time Earnings (OTE) means 

What you earn for ordinary hours of work, including 

  • Over-Award Payments, 

  • Bonuses, 

  • Allowances 

  • Paid leave

  • Commission

  • Shift Loading.

Payments for Overtime hours are generally not included in Ordinary Time Earnings (OTE).

  1. Government super contributions

  • If you’re a low-income or middle-income earner, you may be eligible for super co-contribution up to $500 from the Australian Government.

  •  It's important for you to lodge a Tax Return 

  1. Super Annuation withdrawals are generally taxed at your marginal tax rate at 30% percentage rebate

  2. Personal Super Annuation Contribution 

In addition to the employer's Contribution, Employees can also make their own contribution to Superannuation is called Personal super contributions

There are 2 types of contributions you can make to your super fund

Concessional contributions

Non-concessional contributions

Concessional contributions are deposits made into superannuation funds from Before Tax Income. (Generally paid by your employer, Salary Sacrifice)

Non-concessional contributions are deposits made into superannuation fund by an individual from After-Tax Income.

These contributions are taxed at a concessional rate of 15% once received by your super fund

These contributions are not taxed once received by your super fund

However, you may need to pay extra tax if you exceed the concessional contribution cap Limit.

However, you may need to pay extra tax if you exceed the non-concessional contribution cap Limit.


You cannot claim a deduction on D12 for Personal superannuation contributions 

You may be able to claim a deduction on D12 for Personal Superannuation Contributions 


FY

Concessional Cap Limit

Non-Concessional Cap Limit

2021–22

$27,500

$110,000

2020–21

$27,500

$100,000

Note: You can increase the concessional contributions cap that applies to you when you carry forward unused concessional contributions amounts from previous financial years.

  1. Claiming Deduction under D12 Personal Super Annuation Contribution

There are limits on how much Deduction you can claim.

Question

Particular 

Amount

FY

20-21

Your Salary Income

$80,000 pa

Compulsory Employer Contribution 10%

$8,000 pa

Salary Sacrificed to Superannuation Before Tax ($50 x 52 Weeks)

$2,000 pa

Concessional contributions to Super (Total)

$10,000 pa

Concessional Cap Limit for FY 20-21

$27,500 pa

Difference ($27,500-$10,000)

$17,500 pa

Additional Contribution made into superannuation fund by an individual from After-Tax Income. (PSC)

$11,500 pa

Answer

  1. Maximum Limit

$17,500 pa

  1. But Actual Personal Contribution Made After Tax Income 

$ 11,500 pa 

Whichever is Lower (a vs b) can be claimed under D12 

$11,500 pa


  1. Once the money is placed into your super fund it is then invested by your superannuation company.

Sample Super Investment Breakdown

S. No

Asset

Range

Allocation

1

Australian Shares

10-45%

22%

2

International Shares

10-45%

33%

3

Direct Property

0-30%

7%

4

Infrastructure 

0-30%

13%

5

Private Equity

0-10%

5%

6

Credit

0-20%

5%

7

Fixed Interest

0-25%

12%

8

Cash

0-20%

3%

9

Other Assets

0-5%

0%


Total


100%


  1. Type of Super Fund?

  1. Retail Super Funds

  • Run by Bank or Investment Company or Insurance Company

  • Anyone can easily join this Super

  • Offering widest range of Investment Options Excluding SMSFs

  • Offer Various Insurance Products to the Fund

  • Offer Financial Advice

  • May Offer to View your Super

Examples of Retails Super Funds:

  • AMP Flexible Super

  • Bendigo Smart Start Super (Bendigo Bank)

  • BT Super for Life (Westpac)

  • ING Direct Living Super (ING Direct)


  1. Industry Super Funds

  • Some are open to Anyone, and some are limited to employees in Specific Industry

  • Available Investment options usually are smaller than Retail Funds

  • Industry Funds are Not for Profit Organizations

Examples of Industry Super Funds:

  • Australian Super

  • REST Industry Super

  • Sunsuper

  • Hostplus

  1. Corporate or Public Super Funds

  • Setup by an Employer for its Employees.

  • Member is restricted to Current and Former Employees.

  • May Run Industry Funds or Retail Funds.


  1. Self-Managed Super Funds (SMSFs)

  • It’s a Private Super Fund You Manage yourself.

  • Can have up to Four members and also Trustees responsible for Decisions and to comply with Laws.

  • No Membership Fees.

  • But may incur other costs such as Administration costs, Investing Costs, Accounting Costs, and Auditing Costs.

  • More Control of Investment in choice.


Overview of Superfund Accounts and Assets by Fund Type 2019


Type of Fund

Total Assets ($Billion)

Growth in Assets in Last 12 Months

Number of Funds

Number of Member Accounts

Retail Fund

638.5

8%`

112

11,125,000

Industry Fund

771.4

23%

37

11,348,000

Public Sector 

532.2

15%

18

3,601,000

Corporate Fund

60.5

11%

18

286,000

SMSFs

739.7

8%

594,163

1,125,000

Total

2,951

13%


27.4 million


Simply Looking at 12-Month Difference May not be enough, it can be a better idea to look at the Super Fund performance over the many years, which is something you can able to find on Super Fund Statement


  1. Super Fund offers Three types of Life Insurance 

  1. Life Cover also called Death Cover (Lump sum Income to your beneficiary when you die or Terminal Illness

  2. TPD Insurance (Seriously disabled and are unlikely to work again)

  3. Income Protection Insurance also called Salary Continuance cover (This pays a regular income for a specified period may for 2 Years or 5 Years or Up to Certain Age)


  1. Super Annuation Payable (Super Annuation is Employer Expenses) Super Annuation you can claim a deduction based on Cash Basics because running payroll run super Annuation calculated. That Payroll runs will calculate on Accrual basics 

So, Entry into the Book

Super Annuation Expense (Expenses) Dr $5,000

To Super Annuation Payable (Liability) $5,000

(Accrual Entry created)


Super Annuation Payable a/c Dr $1,000

To Bank a/c                 $1,000

(While making payment to Superannuation by Company)


So Still Payable will be $4,000 on my balance sheet

So, Movement in Provision 


Opening Year

Closing Year 

Super Annuation 

Opening Super Annuation 

$ 5,000

$4,000

$1,000


  1. First Home Super saver scheme (FHSSS)

  1. Help Australian to boost their savings for buying a home for the first time

  2. FHSSS allows Australians to build deposits inside super Annuation 

You can withdraw your FHSSS when you are ready to D13 - Deduction for project pool

  1. buy house

  2. ATO can tell what is the maximum amount you can withdraw from FHSSS


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