Five basics to know about the super system
Superannuation Guarantee – All Employers must pay at least the value of 9% of your wages/salary (not FROM your pay, but another expense of the employer) to your member account in a super fund (including a self-managed super fund). This is a compulsory legal requirement under superannuation guarantee (SG) laws, usually for any employee earning over $450 per month and over 18 years old. These are known as Concessional SG Contributions (the employer gets a tax concession/deduction as a business expense). (Formerly Deductible Contributions)
- Choice of fund –except for employment agreements and some industrial awards, you can choose the super fund you want your employer to pay super into. If you don’t choose your super fund, your employer chooses for you.
- Salary Sacrifice – Is when you tell your employer to deduct some money BEFORE TAX from your pay and contribute that to your super fund with the 9% SG they need to pay. This is also a Concessional Contribution.
- Tax on Concessional Contributions – Your employer’s compulsory SG contributions and any before-tax contributions that you choose to make are both taxed at a maximum rate of 15 per cent on entry to the super fund. Compare a woman earning $37 000 a year – any $ earnt over this will pay at least 30 per cent income tax (for the 2011/12 year, or at least 32.5 per cent for the 2012/13 year) on that same income. Put direct into super, instead of taking it home, will only pay 15% tax.
- Tax rate on investment earnings. Earnings on your super fund’s investments are also taxed at no more than 15 per cent.
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