Superannuation is a concessionally taxed structure and long-term savings vehicle designed to build up funds for retirement. It is a core component of the Government’s Retirement Incomes Policy.

The Government's rules via the Superannuation Guarantee mean that most employees have a minimum level of super contributions made on their behalf by their employers. In addition there are additional tax deductions and rebates available to make saving via superannuation attractive.

You can make your own super contributions, on behalf of yourself or your spouse.

In the past few years there have been literally thousands of changes to the laws in relation to superannuation, making the whole topic particularly complex. Coming to grips with the superannuation laws and keeping up to date is becoming an increasingly onerous task. Ironically the introduction of the “Simpler Super” rules on July 1, 2007 has added to the confusion of many people.

Superannuation savings are usually made through trust funds, and if these funds meet prescribed Government standards, they are eligible for tax concessions. Retirement savings may also be made through Retirement Savings Accounts (RSAs). The major attraction of superannuation is that there is a 15% tax on earnings and a 10% tax on capital gains made by the fund on assets held for at least 12 months. For funds held in a superannuation pension account, investment earnings are tax free and pension payments are tax free if you are over 60 years of age and come with a tax rebate if your are under 60. Over the long term the compounding effect of the low tax rate is quite substantial compared with investments outside superannuation. Balanced against this is the fact that superannuation is preserved until a condition of release, such as retirement, occurs.

As already mentioned, superannuation is a key element in the Government’s long-term objective of moving retired Australians off dependence on the age pension and increasing the level of national savings.

While many investors will contribute to superannuation via employer funds, industry funds or public offer funds, there is a growing trend for investors to take control of their own superannuation via a self-managed superannuation fund which can have up to 4 members all of whom must be trustees of the fund. This latter requirement imposes responsibilities on the members that they need to consider before establishing such a fund.