Why invest in super?
Super is simply the most tax-effective way to save and invest for retirement. The younger you start and the more you contribute, the more you will have to live on in retirement.
There are substantial tax and other incentives to contribute to super. The basic tax incentives compared to other investments are that super is only taxed at 15% on contributions, up to 15% on its earnings and can be drawn down tax-free from the age of 60. There are also incentives for the self-employed, small business, low income earners and non-working spouses to contribute.
Superannuation is a long-term investment that enables you to grow your wealth over decades, through market and economic cycles, and benefiting from compounding investment returns.
When can I access my super?
Once contributions have been made to super it generally cannot be accessed until you reach the preservation age. Those born prior to 1 July 1960 can access their super at 55 and the access age increases in yearly increments up to those born after 1 July 1964 who can access their super at age 60. Upon death of the account holder, accumulated super, along with any life insurance payment, is paid to dependents and other beneficiaries. Super savings can be accessed prior to the preservation age if they were discretionary contributions prior to full preservation coming into effect or if you qualify under special hardship provisions.
Insurance through super
Life and disability insurance cover is usually available through a super fund and many employer funds offer discounted group premium rates. As premiums are paid from a concessionally-taxed super fund account rather than after-income-tax dollars, most people should save money by insuring through their super fund.
Super in estate planning
As super increasingly becomes most people’s key vehicle for long term wealth accumulation outside the family home, its role in estate planning also increases. To ensure your super wealth is passed on to dependents and heirs as you wish it is vital to have up-to-date beneficiary nominations covering life insurance benefits as well as accumulated assets. Funds bequeathed to dependents, including spouse and children under 18, are tax free. However, when paid to non-dependents, including children over 18, tax of 16.5 per cent is levied.