About Superannuation and Self Managed Superannuation Funds (SMSF)

About Superannuation is a retirement (including pensions) scheme in Australia. It has a compulsory element whereby employers are required by law to pay an additional amount based on a proportion of an employee’s salaries and wages (currently 9%) into a complying superannuation fund, which can be accessed when the employee meets one of the conditions of release contained in Schedule [1][1] of the Superannuation Industry Supervision Regulations 1994


In August 2008, 91% of all employees had superannuation provided by their current employer. A higher proportion of employees who worked full-time in their main job were provided with superannuation by their current employer (95%) than part-time employees in main job (79%). While for sector of main job, 98% of employees in the public sector had superannuation provided by their current employer compared to 89% of employees in the private sector.

Almost all (96%) of employees earning $400 and over each week in their main job were provided with superannuation by their current employer. For employees earning under $400, 69% were provided with superannuation.

Source: ABS 6310.1 [8]

SMSF – Self Managed Superannuation Fund

SMSF or Self Managed Super Funds have been in operation for about 30 years. For more detailed information please contact your own Financial Planner or Superannuation Specialist. Although there is no actual legal minimum balance to establish a SMSF, a general guide to consider would be about $250,000 in super benefits. Again, speak with your Financial Planner or Superannuation Professional, prior to establishing a SMSF Fund.

Additionally, the Australian Taxation Office (ATO) have a range of Publications regarding SMSF which should also be considered.

Guide to Self Managed Superannuation Funds

How Superannuation in Australia Works

Employer contributions

Employers must make superannuation contributions to the employees’ designated superannuation fund at least every three months. The superannuation contributions are invested over the period of the employees’ working life and the sum of compulsory and voluntary contributions, plus earnings, less taxes and fees is paid to the person when they choose to retire. The sum most people receive is predominantly made up of compulsory employer contributions.

Special rules apply in relation to employers providing defined benefit arrangements. There are less common traditional employer funds where benefits are determined by a formula usually based on final average salary and length of service. Essentially, instead of minimum contributions, employers need to provide a minimum level of benefit.

Superannuation Guarantee law applies to all working Australians, except those earning less than $450 per month, or aged under 18 or over 70. Individuals can choose to make extra voluntary contributions to their superannuation and receive tax benefits for doing so.

Access to superannuation

As superannuation is money invested for one’s retirement, strict government rules prevent early access to preserved benefits except in very limited and restricted circumstances, including severe financial hardship or on compassionate grounds, such as for medical treatment not available through Medicare.

Generally, superannuation benefits fall into three categories:

  • preserved benefits;
  • restricted non-preserved benefits; and
  • unrestricted non-preserved benefits.

Preserved benefits are benefits which must be retained in a superannuation fund until the employee’s ‘preservation age’. Currently, all workers must wait until they are 55 before they are able to access these funds. All contributions made after July 1, 1999 fall into this category.

Restricted non-preserved benefits are benefits which, although not preserved, cannot be accessed until an employee meets a condition of release, such as terminating their employment in an employer superannuation scheme.

Unrestricted non-preserved benefits are those which do not require the fulfilment of a condition of release, and may be accessed upon the request of the worker. For example, where a worker has previously satisfied a condition of release and decided not to access the money in their superannuation fund.

Preservation Age

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
After 30 June 1964 60

Eligibility for access to preserved benefits depends on a worker’s preservation age. The Howard government announced changes in 1997 to the superannuation system designed to induce Australians to stay in the workforce for a longer period of time, delaying the effect of population ageing. Previously, any Australian could access their preserved benefits once they reached 55 years of age. However, after legislation was passed in 1999, an employee’s preservation age depends on their date of birth.

Hence, by 2025, all Australian workers wishing to access their superannuation would be at least 60 years old.

Reasonable benefit limits

Reasonable benefit limits (RBL) are the maximum amount of retirement and termination of employment benefits that a person can receive over their lifetime at concessional tax rates. When a person receives a benefit the payer must report the contribution to the Australian Taxation Office (ATO). The ATO then determines whether the person has exceeded their RBL and notifies them if they have. There are a multitude of factors that can affect a person’s RBL, complicating the calculation involved. [2]

Effective 1 July 2007, Reasonable benefit limits have been scrapped.

Superannuation taxes

Main article: Taxation of Superannuation in Australia

Most superannuation is concessionally taxed at a flat rate of 15% at three points: on contributions, on earnings and another on the final payout. These taxes contribute over $6 billion in annual government revenue[5]. Superannuation is a tax-advantaged method of saving as the 15% tax rate on contributions is lower than the rate an employee would have paid if they received the money as income. The Federal government announced in its 2006/07 budget that from 1 July 2007, Australians over the age of 60 will face no taxes on withdrawing monies out of their superannuation fund if it is from a taxed source.

In 1996, the federal government imposed an extra ‘superannuation surcharge’ on higher income earners as a temporary levy to raise revenue. As part of the 2001 election campaign, the government promised to reduce the surcharge from 15% to 10.5% over three years. The superannuation surcharge was eventually scrapped in the 2005/06 budget, and has been abolished since 1 July 2005.

From January 1, 2006, the government has allowed the splitting of contributions with a spouse[6]. This allows a couple, who are members of superannuation funds, to split their contributions — personal and employer — evenly. They can thus reduce the risk of exceeding their reasonable benefit limits and therefore reduce their chances of paying a higher rate of tax on their retirement savings.

Superannuation co-contribution scheme

Since 1 July 2003, the Government has made available incentives of a Government co-contribution of up to $1,500 for lower income employees who make personal contributions to their own superannuation fund. Depending on individual income thresholds, the Government pays up to $1.50 for every $1 contributed.

The 2007 Federal Budget announced a one-off double payment of the co-contributions paid due to personal contributions in the 2005/2006 financial year. Lower income earners received up to $3000 co-contribution for $1000 of personal contributions in that year.


Superannuation funds are principally regulated under the Superannuation Industry (Supervision) Act 1993 and the Financial Services Reform Act 2002. Compulsory employer contributions are regulated via the Superannuation Guarantee (Administration) Act 1992

Source : [7]


It is imperative that you check all current up to date information about Superannuation. Engage and utilise professional superannuation planners.

Other Superannuation aspects to consider include: employee superannuation, superannuation, self managed superannuation, diy superannuation, superannuation funds, superannuation in Australia, superannuation life insurance, life insurance superannuation, lost superannuation, missing superannuation. As you can see, there is an exhaustive list of superannuation areas to take into consideration.


1 Australia may hold key to pensions, retrieved July 21, 2006
Lateline – Tony Jones speaks to former prime minister, Paul Keating, retrieved October 6, 2006
Quarterly Superannuation Performance December 2007, retrieved May 13, 2008
Australia ‘tops’ in managed funds, retrieved January 23, 2006
2006/07 Budget – Estimates of Revenue, retrieved July 21, 2006 
6″Split that can benefit you and your spouse”. Retrieved 2006-01-24. – Superannuation In Australia

8. 6310.0 – Employee Earnings, Benefits and Trade Union Membership, Australia, Aug 2008 Quality Declaration
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 17/04/2009 URL

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