We want to empower you to take control of your finances and own your tomorrow. But we know it’s not always easy. The language of finance can be complex and confusing.
In our latest jargon buster article, we explain superannuation terms in everyday language.
Preservation age
To access your super savings without restrictions you generally need to have reached your preservation age. Your preservation age depends on your date of birth, so check out the table below to find yours.
| 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 1 July 1964 | 60 |
Superannuation guarantee (SG)
The compulsory payments your employer makes into your super fund before you have been taxed. All Australian employers are required to pay at least 9.5% into their eligible employees’ super accounts. The SG rate is frozen until 30 June 2021, after which time it is set to increase gradually to 12% by 1 July 2025 i.
Concessional (before-tax) contributions
Concessional or before tax contributions are payments into your super by your employer from your before-tax salary (including super guarantee and salary sacrifice) up to limits of $30,000 (or $35,000 if you’re over 49). These contributions are only taxed at 15% in your super fund. This is lower than most people’s marginal tax rate —unless you earn over $300,000, in which case the tax is 30%. From 1 July 2017, the amount of before-tax salary contributions you can make in a financial year will reduce to $25,000, regardless of your age.
Non-concessional (after-tax) contributions
Currently, you can contribute up to $180,000 a year into your super using non-concessional or after-tax funds—or $540,000 spread over three years. However, from 1 July 2017, the annual cap on after-tax contributions will reduce to $100,000.
Although these after-tax contributions won’t qualify for a tax deduction, non-concessional contributions can still be a tax-effective way of saving for retirement. Any earnings are only taxed at up to 15% and any after-tax contributions that form part of a future withdrawal will be tax-free once you can access your super.
Co-contributions
Depending on how much you earn and if you are eligible, you can top up your super using after-tax contributions and your super fund may receive a co-contribution payment of up to $500 from the government.
Beneficiaries
Beneficiaries are the people you want to receive your super savings in the event of your death. Your will doesn’t include who will receive your super. So if you don’t name your beneficiaries, your super fund may decide who gets your money after your death.
There are two types of beneficiaries: binding and non-binding. Having a non-binding beneficiary will give the trustee an indication of how you would like your super distributed. However, making a binding nomination is the only way to make sure your super savings will go to the right people at the right time, because your super fund is legally obliged to follow your instructions.
It’s important to note that if your super fund has binding nominations they are only valid for three years, so you need to keep them up to date.
Next time your binding nomination lapses, ask us whether your super product allows you to change to a non-lapsing binding nomination. This would mean having less personal administration to worry about—you nominate your beneficiaries once and don’t have to worry about it again unless you want to change it.
It also gives you the peace of mind that you won’t get caught out if you don’t receive the lapsing reminder notice and something happens to you.
Need more help?
Please contact us on ph 07 4659 9881 to help you understand the effect of tax-effective contributions on your super, so you can decide what path is right for you.
1 ATO – Changes to the super guarantee
Source: AMP 20th December 2016