What Is Superannuation?

There’s a lot of jargon used when speaking about super in Australia. So we’ve broken down the complexity to explain what you need to know and how to make super work harder for you.

Superannuation is one way Australians can save money for their retirement. This is mostly money set aside by your employer over the time you work.

Your employer should pay 11.5% of your salary into a super fund, through the Superannuation Guarantee (SG). You can also top up your super by making your own contributions, and where you are eligible the government may add to it through co-contributions and the low income super contribution.

The money deposited into your superannuation account is then invested, and the growth reinvested, to help the balance grow. The idea is that, when you retire and no longer receive an income, you can access your superannuation, rather than relying solely on the age pension, to support your lifestyle.

Since super lowers the government’s future pension costs, tax incentives may apply to your SG and other contributions.

Needless to say, many rules and regulations apply. We’ve provided information on many of those in this section.

How is money put into my super?

Your employer should pay 11.5% of your salary into a super fund of your choosing, through the Superannuation Guarantee (SG). This is typically taken from your ordinary time earnings, so your employer may not include any overtime hours that you work.

You can also top up your super by making your own contributions, and where you are eligible the government may add to it through co-contributions and the low-income super contribution. See our salary sacrifice calculator to see how your additional contributions could help your super grow.

Why do we have superannuation?

Superannuation is one way to save for retirement. The savings in your super account generally cannot be accessed until your reach retirement age, helping you transition from earning a regular wage into retirement.

The savings in your super account grow over time thanks to contributions from your employers. Currently, employers are required to deposit 11.5% of your base wage into a superannuation fund of your choosing. This is called the Superannuation Guarantee (SG) Contribution.

You can also add your own contributions, or take advantage of government co-contributions (if you’re eligible).

The savings in your super account should also grow through investment performance. Your super provider will invest money on your behalf, with the aim of giving you the largest possible balance at retirement.

Insurance products can also be bundled into your superannuation. Purchasing insurance in this way means you pay from a lower tax environment.

How super works in Australia.

At the heart of the government’s superannuation scheme is an intention to create an environment in which people can put money aside to provide a better income in retirement.

The purpose of superannuation has been a hot topic. Find out more about Virgin Money’s perspective. For some more background on the history of superannuation, check out the Virgin Money Blog.

How super works for you.

Several key components make superannuation work for you. Contributions, roll-overs, investment strategy and performance help your super grow for retirement.

Fees for managing your account come directly out of your super balance, and small differences in the fees charged could have a big impact on your super balance at retirement.

Additionally, some insurance products can be purchased through your superannuation fund rather than directly with insurers, so consider this when choosing your super fund.

Finally, different super providers offer different levels of customer service and account access. Find out more about managing your super.

Are you eligible for super?

PAYG

Most people who work in Australia are entitled to have their super paid by their employer. This means your employer has to pay a minimum of 11.5% of your salary into your super fund if:

you’re over 18
you’re under 18 and work 30 or more hours a week.

It doesn’t matter if you’re working full time, part time or casually – if you meet these requirements, you should receive SG contributions from your employer. There are some exceptions to this such as domestic workers (nannies, etc) don’t get paid SG unless they work for 30 hours per week, similar to the rules for under 18s. For more information, please refer to the ATO.

Sole Trader or Self Employer

If you're a sole trader or in a partnership, you don't have to make Super Guarantee (SG) contributions for yourself. While it’s not compulsory, you can choose to make personal super contributions as a way of saving for your retirement.

There are also great government benefits to help you save for your retirement. Find out about making super contributions here.

What your employer does when you start a new job.

Your employer is required to pay your SG contributions to a super fund (most of the time, your choice of fund) at least four times a year, by the quarterly due dates. They have to use Ordinary Time (OT) earnings to determine the amount of your contribution.

When you start a new job if you do not advise your employer of your super fund of choice they are first required to look up the super fund your most recent employer was making super contributions too. Also known as Stapling.

Stapling means that one super fund will follow an employee from job to job, and contributions will be paid to that super fund, unless they explicitly decide to sign up for another super fund. This is different to how it used to work, where when an you changed jobs, your super was put into the employers defaulted fund, unless you told them otherwise.

All employers must have a nominated default superannuation fund available for their employees. At the time you start a new job, your employer could also give you the option to either select their default fund.

What your super fund does.

Once your superannuation fund receives your contributions (either from your employer or your voluntary contributions), it invests this money into a default strategy (like the Virgin Money Super Lifestage Tracker®) or the investment options you’ve chosen yourself.

How you invest your money is your choice. Most super funds provide a number of options including a range of asset classes that offer different rates of risk and growth. You can choose how you'd like your money invested, if you want to. To find out more about investing choices, see our investment options page.

You can also transfer your money to a different investment option within your fund, or to another super fund at any time. But take note of any fees when doing this.

See below for more information on how your money is invested.

Your role

You can decide to have your regular SG contributions paid into your employer’s nominated default super fund or choose your own fund. You can also choose or change funds at any time - but your employer is only obliged to act on your choice once a year.

It’s all about finding the right super fund to meet your retirement goals. Even if you don’t know what they are today, that’s okay, it’s about getting the most out of your investment for your future.

And remember it’s your money. Be sure to keep an eye on your superannuation payments and balance to ensure your money is working as hard as it can for your retirement.

Even if your super fund isn’t linked to your everyday banking, lots of super funds (including Virgin Money Super) provide great online account management tools. We’re not suggesting you log in every day. But it’s good to jump into your account once every three months to make sure your employer is making your SG contributions, and to assess the performance of your investments. It only takes a few minutes.

Remember, if you’re changing jobs, a lot of things in your life are probably changing – and this is probably a good time to take a closer look at your super and the benefits it offers.

How do I choose a super fund?

You can choose the super fund that you would like your contributions paid into. When you begin working for an employer, they will provide you with a Superannuation Standard Choice form which will allow you to make that choice in writing. This will then be where your employer will pay the Superannuation Guarantee (SG).

If you do not nominate a super fund for your employer to contribute the SG into, your employer may use their nominated super fund, or default fund. All employers have a nominated super fund so if you are not sure, you can ask your employer.

You can use our Fee Comparison Tool to compare the super fees of some popular super funds.

Get started now with Virgin Money Super

More about how super works

Virgin Money Superannuation - How your Super is invested

Is superannuation taxed?
Yes, superannuation is taxed, but usually at a much lower rate than your taxable income. There are three main areas where your superannuation will be taxed; on contributions, on the investment earnings within the fund and on withdrawals. The specific tax rate applied to these elements depends on factors such as your income and age.
- Contributions Tax: When your employer makes contributions to your superannuation fund, a contributions tax may apply. This tax rate is typically 15% of the contributed amount, but it can vary depending on your income.
- Investment Earnings Tax: The returns generated by your superannuation investments are also subject to tax within the fund. Generally, this tax rate is 15%, but it can differ based on the type of investments and the fund's structure.
- Withdrawals Tax: When you access your superannuation savings, the tax you pay depends on your age and the amount you withdraw. Generally, superannuation withdrawals are tax-free after the age of 60. However, if you withdraw before this age, there may be taxes involved.
What is the superannuation rate?

The current superannuation rate in Australia is 11.5%. This means that if you earn $100,000 per year, your employer is legally required to contribute $11,500 to your superannuation fund each year. The superannuation rate is scheduled to increase to 12% by 1 July 2025. For the most current information regarding superannuation rates, we recommend checking with the Australian Taxation Office (ATO).
Can you access you superannuation early?

In Australia, early access to your superannuation is generally limited, as it’s primarily intended to provide financial security during retirement. However, there are specific circumstances in which early access may be possible. Some of these include severe financial hardship, terminal illness, incapacity, on the basis of compassionate grounds or retirement.

To determine your eligibility and explore the best course of action for your unique situation, it's important to talk your super fund provider or consult a qualified financial advisor. They can provide valuable insights and guide you through the process of assessing your options.
How is superannuation calculated?

Superannuation is calculated by applying a percentage to your regular income, excluding overtime pay, bonuses and irregular earnings. This percentage, known as the Superannuation Guarantee rate, is currently set at 11.5%. To better understand your specific superannuation situation, use one of our super calculators.

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HOW DOES SUPERANNUATION WORK IN AUSTRALIA?