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How super works in Australia: comprehensive guide

September 7, 2023 | 6 min read 


Summary: Understanding how superannuation works in Australia, will help you better understand how your money’s being managed so you can make more informed decisions.


Super is money that you save during your working life to use as income when you retire.

Like any other investment, the intent is to increase your super account balance, over the long term, while you’re still working. Once you’ve reached retirement, your super savings are generally converted into a pension, providing a regular income for you to live on.

Understanding how super works in Australia, will help you better understand how your money’s being managed so you can make more informed decisions.


Super in Australia explained

If you are employed in Australia in any capacity, you must be paid super by your employer. This is paid on top of your annual salary known as the Super Guarantee (SG). This includes many people who may consider themselves self-employed but are employed by their own company or trust.

Currently, your employer must contribute 11% of your salary into super. This rate will continue to increase every year until it reaches 12% in 2025.

The intention behind the gradual increase is to see a greater proportion of retirees relying less on the age pension and more on their retirement savings.

Your Future, Your Super

The Federal Government introduced a new set of reforms whereby your super now follows you from job to job.

This means when you start a new job, your employer will be required to pay super into your existing ‘stapled’ fund, if you don’t nominate a new one.


Are you eligible for super?

You’re generally eligible for SG if you’re employed (regardless of your income), aged 18 years or over, or under 18 and work more than 30 hours a week. This includes employees who work full-time, part-time or on a casual basis, as well as those on a temporary visa.


How your super is invested

Many of the principles of investing in super are the same as investing outside of super. The main difference is how your investments are taxed: you pay less tax on investment earnings inside super.

If you are a member of an industry, retail, corporate or public sector fund, your money is combined with other peoples’ super to buy investments. This enables your super to grow in two ways:

  • growth in resale value called capital growth
  • reinvested income such as rent or dividends.

If you don’t actively choose how you want your money invested when you join a fund, you will be placed in a default investment option which may or may not be in line with the level of risk you are willing to accept to achieve your investment goals.

It’s important to regularly assess how your super’s invested and make changes if necessary. For example, taking a more conservative approach, means you’ll have higher exposure to cash and fixed-income assets as they offer less risk than shares and property.


What are the main types of super funds?

Superannuation funds can be broken down into five different types:

Corporate/employer-sponsored super funds

Some medium to large businesses have their own super fund which is only available to their employees. They can offer tailored fee and insurance arrangements, and a wide range of investment options.

Industry funds

Industry funds were originally established to support employees within a particular sector but most are now open to everyone. They stand by a non-profit, member-first ownership model and re-distribute profits from investments directly to members.

Retail funds

These funds are run by banks, financial institutions or investment companies, designed to give members a vast array of investment options. The company that owns the fund generally aims to keep some profit which is paid to shareholders.

Public sector

Designed for people working in the public sector, these funds have limited investment options but low fees. Profits remain within the fund for the benefit of members.

Self-Managed Super Funds (SMSFs)

SMSFs enable you to have complete control over how your retirement savings are invested—a private super fund that you manage yourself.


Personal super contributions

The 11% of your salary that your employer contributes into super may not be enough to sustain the lifestyle you currently have, or the one you wish to have, during your retirement.

There are a range of strategies you can implement to improve your retirement savings, like putting a little extra money into your super while you’re still working.

Personal super contributions—those made from savings or your take-home pay—may be tax deductible. These tax deductions can be claimed against your assessable income when you lodge your tax return.

Personal deductible contributions and employer super contributions are concessional contributions which are capped at $27,500 per financial year (unless you are eligible to use unused concessional contribution caps from the last five financial years). If you contribute over this amount, the excess amount will be included in your taxable income.


Tax on super investment earnings

Your super fund pays tax on any income or profits it makes from your investments. The tax is generally reflected in the daily unit price for each investment option or on a member’s transaction statement.

  • Super account investment earnings are taxed at a rate of up to 15%
  • Transition to retirement pension investment earnings are taxed at up to 15% (tax free when you’re over 60)
  • Retirement pension account investment earnings are not taxed


How to look after your super

There are many ways you can look after your retirement savings to have the best possible future.

  1. Regularly contribute: the more you contribute to super over time, the more your savings will grow through compound returns.
  2. Salary sacrifice: consider sacrificing a portion of your pre-tax income into super to reduce your taxable income and boost your retirement savings
  3. Consolidate your super: if you have multiple super accounts, consider consolidating them into one fund. You would avoid paying multiple fees and it will be easier to track your investments
  4. Keep track of lost super: the Australian Taxation Office (ATO) can assist you in locating and consolidating any lost super or unclaimed super funds you may have
  5. Check investment options: understand your super fund's investment options and risk profile. Choose the investment strategy that aligns with your risk tolerance and retirement goals
  6. Review fees and charges: compare fees and charges across different super funds. Lower fees can significantly impact the growth of your super balance over time
  7. Review insurance cover: check your insurance cover to ensure it meets your needs
  8. Plan for the long term: remember that super is a long-term investment so it’s important to avoid making rash decisions based on short-term market fluctuations
  9. Seek professional advice: if you're unsure about managing your super, consider seeking advice from a licensed financial adviser.


Frequently Asked Questions:

Can I withdraw my super at any time?

No. You must be retired and have reached your preservation age—preservation age is between 55 and 60, depending on your date of birth. You can also draw your super if you leave work after age 60 or you reach age 65.

There are some circumstances however, where you may be able to access it early.

What is the disadvantage of super?

Your super savings will generally be locked away until you’re retired and have reached your preservation age, leave work after age 60 or reach age 65.

How does super get paid out?

When you retire, you can withdraw your super in two ways. You can access it as a lump sum payment or start an income stream. This allows you to access it as a regular income, in a similar way to if you were still working.


Bottom line: Bottom line: super is more complicated than it probably should be—but better than you think. The mix of a whole range of regular contributions, tax savings and structured long-term investing make it a powerful engine for delivering an anxiety-free retirement.


* Based on KPMG Super Insights 2023 Report as at May 2023 KPMG Super Insights 2023 Report

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Related links

Starting a new job: should you stick with your existing super fund?

Calculating your super: which tools are best?

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  • This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at November 2023 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.