Saving for retirement can be stressful no matter your situation. Luckily, in Australia, it’s required by law for employers to contribute to their employees’ super funds—also known as retirement savings.
However, despite strict rules and regulations, many Australians still don’t fully understand the superannuation guarantee.
Under this guarantee, Australian employers are required to pay a percentage of your ordinary time earnings into a super of your choice. These contributions are made quarterly.
Ultimately, there are a lot of things to know about the superannuation guarantee in Australia so this guide will describe everything in greater detail. Like all things in life, it’s important to prepare in advance, and retirement planning is no exception.
What Is the Superannuation Guarantee?
Thanks to rules set by the Australian Tax Office, all employers are required to meet certain standards regarding their employees’ financial situation. Whether you’re an employer or an employee, it’s important to understand these standards and regulations so you can make sure your finances are handled properly.
With this in mind, what is the superannuation guarantee? Under this regulation, employers pay superannuation contributions of 10.5% of an employee’s or ordinary time earnings when an employee is over 18 years of age or under 18 years of age and works over 30 hours a week. The super guarantee isn’t just for full-time employees, it’s also for casual and part-time employees. The super guarantee is paid at least every three months or quarterly and it’s directly given into the employee’s account of their choice.
All employers are required to adhere to the superannuation guarantee regardless of their size or number of employees.
Even if you are employed as a contractor, you might still be owed the superannuation guarantee under these regulations from the ATO.
The rate is currently set at 10.5%, but this is expected to increase by 2025. In fact, when first introduced, the guaranteed rate was only 3%. It’s easy to understand how this has increased over the years as the cost of living has risen and so have the needs of retiring generations.
Is the Super Guarantee Enough?
Another important question to ask about the superannuation guarantee is whether this is enough money to retire on. While it’s always a good idea to check in with your financial preparedness, especially in terms of retirement, the superannuation guarantee alone is not usually enough to cover your retirement costs comfortably.
This is why it’s almost always recommended to make extra super contributions, especially if you choose to sacrifice some of your pre-tax income. You can also make voluntary after-tax contributions from your income or savings. Remember this qualifies for a tax deduction if you’ve made any personal super contributions under specific criteria.
However, before you make any extra super contributions, keep in mind that these contributions and earnings are preserved. That means, they can’t be accessed until your retirement or you reach preservation age which is typically at age 55 depending on your date of birth.
What if the Super Guarantee Isn’t Paid?
What happens if the super guarantee isn’t paid by your employer? If you’re currently employed and you think your superannuation hasn’t been paid according to the regulations, you should make a formal complaint to the ATO.
Before doing this, check the following:
- Understand the agreement covering your current employment status.
- Check your pay stub to see if it has any clear information about your super payments.
- Talk to your employer directly to see if they have any existing concerns.
- Search for a super fund through the Australian government’s superfund to lookup to see whether a payment has been made on your behalf.
Employers are required to follow these rules, or they can face fines and additional penalties. While the super guarantee alone likely isn’t enough to fund your entire retirement savings prior to turning 55, it is a safety net that many people are thankful for. This is why it’s important to check in with your superfund regularly, so you can stay up-to-date with your progress and understand your employer’s contribution.
Are You on Track for Retirement?
With that in mind, are you on track to retire? You’re super fund is a great first step, but this usually isn’t the only stuff. The amount you need to retire comfortably in Australia is always rising with inflation, so it’s important to calculate how this affects your lifestyle. Additionally, you’ll need to consider your current salary, existing super balance, and assets. Using a retirement calculator is one of the ways to determine if you’re currently on track for retirement.
Everyone has different retirement expectations. What works for one person might not work for another, and this is a normal part of the planning process. However, you need to be prepared no matter what your expectations are. This is where a savings professional really makes a difference.
Work with one of the team members at Debt Buster’s today to determine whether you’re on track to clear your debts before retirement. Even if you don’t have any goals at the moment, our team can work with you to make sure you’re prepared no matter what the future brings. Contact a member of our team today on 1300 368 322 to schedule your first meeting.