Most of us whether employed or self employed would become members of a superannuation fund in our working lives. What amazes me however is how so many of us still don't know how the superannuation system works . So here is a quick snap shot of how it works.
The superannuation system was designed to help people save money for their retirement. Money is contributed during your working life in order to provide you with a source of income once you retire.
Most people are entitled to compulsory superannuation contributions from their employers that should be made to a superannuation fund of their choice at least once every three months. The amount of contribution is calculated as a percentage of your income, which is currently set as a minimum 9%. You or your employer can also choose to contribute additional funds to your superannuation account at any time. If you are self employed, you would be able to contribute for yourself and the contributions may be tax deductible when you lodge your tax return.
The superannuation fund invests the money you have in your account on your behalf to maximise the return for the associated risk profile that you specify. The superannuation fund will charge you fees to manage and grow your super balance.
Except under exceptional circumstances you do not have access to your super money until you retire or turn 65. When you retire, you can obtain the money from your superannuation fund in a lump sum or as an income stream.
BY SURESH RAJANI
Suresh Rajani is
the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.
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