What is Superannuation?
Superanuation is the Government’s desired savings/investment vehicle to fund your future lifestyle needs in either, part time, or full time retirement.
The Government encourages everyone, irrespective of what seems to occur in the media, to self fund through Superannuation. It does this by providing a very generous tax incentive structure for you to accumulate super over the long term.
There are various ways of accumulating superannuation, such as:
- Employer 9.5% super contribution
- Salary Sacrifice
- Contributions from your after –tax savings dollars
- Gearing(to a lesser extent)
The objective of superannuation is to provide you with retirement income when you reach eligible retirement age (depending on the year you were born) which can be as early as age 55 or up to age 65 or older.
Note: Once you reach 65 years of age, you do not have to commence a super/pension, if you believe that you don’t need to, but the objective is to certainly start generating a pension income when you reach eligible retirement age.
Why do I need this?
You need superannuation simply because, as an aging population, the Government has realised that it cannot afford to look at after this increasing population through the CentreLink Age Pension structure.
Therefore, there could be a lesser likelihood of them looking after you in your old age.
As an ageing population, this could mean, that in 20+ years, the number of employees could eventually outnumber the number of retired Australian citizens receiving the Age Pension.
This would mean that the Government wouldn’t be able to collect enough tax from salaries and spending (GST) to sustain an appropriate pension income for retirees.
You may have noticed that the pension age will slowly creep up to age 67, and then to age 70!
This does not affect your superannuation, as you can receive a super/pension much earlier, but will it be enough?
You will need a substantial amount of superannuation for your future well being, as no one else will be looking after you.
What happens if my employer doesn’t pay Superannuation?
If your employer does not pay 9.5% superannuation contributions, you can report this event to the ATO.
The ATO in turn have the legal power to follow this up with your employer and obtain the missing contributions, providing the company is still solvent.
It is important to monitor your superannuation contributions regularly. In this day and age of technology, every individual has internet access to their superannuation accounts. I encourage you to look at your super. If you require assistance with this, please do not hesitate to call our office.
What will the cost be to me?
With regards to super, the 9.5% SGC contributions are made by your employer as part of your salary package.
If you salary sacrifice your gross salary into your superannuation, along with the 9.5% employer contributions , the superannuation fund needs to allow for the maximum tax of 15% (contribution tax).
However, this tax is off-set by other deductions i.e. deducible expenses from the superannuation fund. These costs are:
- Life insurance premiums
- Administration fees charged by the fund itself
- Fund Manager fees
- Advisor fee
Once again, it is important to know what your costs are and if you obtain advice from an adviser, all these costs must be clearly documented on your Statement of Advice provided by the Advisor.
How can FOFM help?
Here at FOFM we can help in a variety of ways:
- It can be as simple as providing you with broad advice on your current super/s.
- Consolidate your supers into one account
- Provide information on various super options
- Prepare a strategy to help you move forward with your long term super savings for retirement purposes.