New to Australia - Superannuation simplified

Superannuation or Super (for short) is a retirement fund. It is similar to  CPF of Singapore or SSS/GSIS of Philippines. In Australia, employers are required to contribute 9.5% of your ordinary earnings as long as you are 18 years old or above and earns at least $450 per month. But unlike Singapore and Philippines, there is no one government agency to receive these funds. The employee may choose any of the super funds or may even manage their own super fund. Personally, I think they are all the same. An employee may not even choose one and just leave it to the employer's super choice. Super funds contributions can be tracked anyway as these are tagged with your TFN - Tax File Number. Although, it is advised that you consolidate all the contributions into one account.

So, the main issue faced by migrants, especially the older ones, is how to grow their super. Below is the table which compares three options in personally contributing to your retirement fund:

Super Contribution options

In the options above, let us assume that the annual salary is $85,000 and that option A is when you just leave everything to the employer which is their compulsary 9.5% contribution. Options B and C are when you, as the employee, decides to add more to the account in the amount of $5,200 annually or $100 weekly (amount may differ according to your capability). The difference between these two latter options is the tax incurred in how you added contributions to your funds. In scenario B, you ask your employer to deduct the amount of contribution from your salary, thereby decreasing your taxable income. This is called salary sacrifice or also Pre-tax contribution. While option C is when you decide to make the contribution after your have received your net pay. This is termed as after-tax contribution. Note that the total tax on the last column is only shown for illustration purpose. Tax on salary will be paid by your employer while tax on super is facilitated by your super fund.

These are actually just scenarios for your consideration. I would personally go for option B as I don't only save on tax, I would also be growing my retirement fund.


Disclaimer : Changes may have taken place after the writing of this blog.