Superannuation

Australians have over $1.2 trillion invested in superannuation, for many people it’s their single biggest asset. A new survey has found millions of Australians nearing retirement don’t understand basic super terms. That really scares me. If you don’t know how super works you aren’t maximising your valuable retirement savings.

Suncorp Life found one in three Australians aged between 50 and 64 years don’t understand the phrase “transition to retirement”, a lucrative strategy for over 55’s still in the workforce. It says other confusing terms include preserved benefit, non-concessional contribution and commutation.

Mixing up these terms may mean you miss out on extra super. Let’s start by clearing up any confusion.

Transition to retirement is a way for people over 55 years of age to salary sacrifice part of their wage into superannuation while getting an income from their super savings. You pay no tax on the income you get from your super and only 15 per cent contributions tax on the amount you salary sacrifice, instead of your regular income tax rate. The money you save can go to your super account instead of the taxman.

Non-concessional contributions is money you put into your super from your after-tax income. You benefit by paying less tax on investment gains. Since the money is invested in super your returns are taxed at a maximum 15 per cent, not your regular income tax rate, and you won’t have to pay any capital gains tax.

Preserved benefit means superannuation savings that must be kept in super until retirement. These days that’s all your super. Remember if you make voluntary contributions, before or after tax, it becomes part of your preserved benefit and you can’t touch that money until retirement.