Superannuation
Super fund
A super fund is an organisation or trust that receives, invests and pays out superannuation savings on behalf of its members, to provide for their retirement.
A super fund is a trust that holds money for the retirement of its members. Contributions from employers and individuals go into the fund, which invests them in assets such as shares, property and bonds, and the fund pays benefits to members when they meet a condition of release, such as retiring after reaching preservation age. Australians can usually choose between several types of fund, and the choice can affect fees, investment options and insurance.
The main types are industry funds, retail funds, public sector funds, corporate funds and self-managed super funds. Industry and retail funds are run by professional trustees and are open to many members. Self-managed super funds are run by their members, who act as trustees. Each fund type has its own fee structures, investment choices and insurance features, and it is sensible to compare them with a view to the member's needs.
To receive employer super guarantee contributions, a fund must be a complying fund that can accept them. Regulated funds are supervised by APRA, and self-managed super funds are regulated by the ATO. Funds are required to report to members, publish their performance and keep member balances secure. Members can find lost or unclaimed super through ATO online services, and can consolidate multiple accounts to reduce fees.
Super funds are taxed on their income at concessional rates, which differ for accumulation and retirement phases. Contributions are also taxed in the fund in certain circumstances. The details change with legislation, so check ato.gov.au for the current rates. Members receive benefits that may be tax-free after a certain age, depending on whether they come from a taxed source and the person's age.
From the point of view of a small business, the main interaction with a super fund is paying SG for employees. The employer needs the fund's details, which may be provided through the employee's choice of fund form or through the ATO. GST does not apply to contributions, but funds that carry on enterprises, for example by leasing commercial property, may need to consider their GST position. Residential rent held by a fund is input-taxed.
A common misunderstanding is that the employer chooses the fund. In most cases, the employee has choice. Another is that all funds are equal. They differ in fees, performance and insurance, and members who never review their fund may pay for cover they do not need.
This is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
Chloe has two super accounts, one with $15,000 and one with $4,000, each charging a $78 annual admin fee. By combining them she saves one $78 fee each year, and avoids paying twice for insurance. She uses ATO online services to find and roll over the smaller account into her main fund. Her employer then pays all future SG into the main fund, once she gives them the fund details.
Practical tips
- Compare fees, performance and insurance before choosing a fund, and review it from time to time.
- Consider consolidating multiple accounts to save fees, but check any insurance you would lose first.
- Employers should verify that a fund is complying and able to accept contributions before paying into it.