Continuing our 2 part series, here is five more basics about the Australian Super system. (For the first 5 Basics 1-5 see HERE)
- Investment Choices – While the big major super funds allow you to choose how you want your money invested by the super fund (by choosing from your super fund’s investment options) you have much more choice in self-managed super (SMSF). Of course if you don’t make an investment choice, then your super money is invested in the default investment option. The default option is usually invested in a range of assets, often called the balanced investment option, although some super funds call it a growth option. Investments are spread across high and low risk assets to manage the risk that some of the investments may lose money.
- Member Statements – Your super fund must send you regular reports (at least annually) on the fund’s performance, and on your own personal super account performance. Your super fund must also disclose fees charged, and show you any other transactions on your super account (such as the deductions for insurance premiums and taxes).
- Preservation until you Retire – Your money is preserved in super, which means you generally can’t take your money (benefits) out of the super fund until you elect to retire at or after your preservation age (from age 55 to 60, depending on your date of birth), or when you satisfy another condition of release. For permission to withdraw your super you must, in the correct technical language, satisfy a “condition of release” which are very specific, such as resigned from your employment
- Co-contribution extra from the Government! – If you make a deposit of your own personal money (that is non-concessional (after-tax)) contributions to your super fund, depending on your income tax level/margin, the government may put some tax-free money into your super fund for you. This is known as the co-contribution and phases out on a sliding scale. See More at the ATO site.
- Contributions Caps – Max Contributions – There are maximum levels that can be contributed, that you can make each year to non-concessional caps (2014-2015 $180,000) and concessional caps ($, or you pay penalty/extra tax.
The general concessional (before tax) contributions cap for 2013-14 is $25,000.
However, from the 1 July 2013 if you are 59 years old or over on 30 June 2013, additional concessional contributions will be able to be made to your super, with the cap increasing from $25,000 to $35,000.
From 1 July 2014:
– The higher cap of $35,000 will also apply to people who are 50 years or over
– The general concessional contributions cap will rise to $30,000.
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