Compare top rated superannuation funds

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

Ethical investment funds limit themselves to making ‘ethical’ investments (which each fund defines according to its own principles). For example, ethical funds might avoid investing in companies or industries that are linked to human suffering or environmental damage.

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

• The name of your preferred superannuation fund
• The fund’s address
• The fund’s Australian business number (ABN)
• The fund’s superannuation product identification number (SPIN)
• The fund’s phone number
• A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

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SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

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Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

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Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

So you need to ask yourself these four questions when comparing superannuation funds:

• How many fees would I have to pay and what would they cost?
• What insurances are available and how much would they cost?
• What investment options does it offer? How would they match my risk profile and financial needs?
• How have these investment options performed historically?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

Setting up an SMSF takes more work than registering with an ordinary superannuation fund. 

An SMSF is a type of trust, so if you want to create an SMSF, you first have to create a trust.

To create a trust, you will need trustees, who must sign a trustee declaration. You will also need identifiable beneficiaries and assets for the fund – although these can be as little as a few dollars.

You will also need to create a trust deed, which is a document that lays out the rules of your SMSF. The trust deed must be prepared by a qualified professional and signed by all trustees.

To qualify as an Australian superannuation fund, the SMSF must meet these three criteria:

• The fund must be established in Australia – or at least one of its assets must be located in Australia
• The central management and control of the fund must ordinarily be in Australia
• The fund must have active members who are Australian residents and who hold at least 50 per cent of the fund’s assets – or it must have no active members

Once your SMSF is established and all trustees have signed a trustee declaration, you have 60 days to apply for an Australian Business Number (ABN).

When completing the ABN application, you should ask for a tax file number for your fund. You should also ask for the fund to be regulated by the Australian Taxation Office – otherwise it won’t receive tax concessions.

Your next step is to open a bank account in your fund’s name. This account must be kept separated from the accounts held by the trustees and any related employers.

Your SMSF will also need an electronic service address, so it can receive contributions.

Finally, you will need to create an investment strategy, which explains how your fund will invest its money, and an exit strategy, which explains how and why it would ever close.

Please note that you can pay an adviser to set up your SMSF. You might also want to take the Self-Managed Superannuation Fund Trustee Education Program, which is a free program that has been created by CPA Australia and Chartered Accountants Australia & New Zealand.

Before you set up a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

You can keep your superannuation fund for as long as you like, so nothing happens when you change jobs. Please note that some superannuation funds have special features for people who work with certain employers, so these features may no longer be available if you change jobs.

On the day you claim the age pension, you must be in Australia and you must have been an Australian resident for at least 10 years (with no break in your stay for at least five of those years). The following exceptions apply:

• You’re exempt from the 10-year rule if you’re a refugee or former refugee
• You’re exempt from the 10-year rule if you’re getting Partner Allowance, Widow Allowance or Widow B pension
• You can claim the age pension with only two years of residency if you’re a woman whose partner died while you were both Australian residents
• You might be able to claim the age pension if you’ve lived or worked in a country that has a social security agreement with Australia

Four questions to ask yourself before taking out an SMSF include:

1. Do I have enough superannuation to justify the higher set-up and running costs?
2. Am I able to handle complicated compliance obligations?
3. Am I willing to spend lots of time researching investment options?
4. Do I have the skill to make big financial decisions?

It’s also worth remembering that ordinary superannuation funds usually offer discounted life insurance and disability insurance. These discounts would no longer be available if you decided to manage your own super.

As a contractor, you’re entitled to superannuation if:

• The contract is mainly for your labour
• You’re over 18 and earn more than $450 before tax in a calendar month
• You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Please note that you’re entitled to superannuation even if you have an Australian business number (ABN).

• SMSFs have high set-up and running costs
• They come with complicated compliance obligations
• It takes a lot of time to research investment options
• It can be difficult to make such big financial decisions

MySuper accounts are basic, low-fee accounts. If you don’t nominate a superannuation fund, your employer must choose one for you that offers a MySuper account.

MySuper accounts offer two investment options:

1. Single diversified investment strategy

Your fund assigns you a risk strategy and investment profile, which remain unchanged throughout your working life.

2. Lifecycle investment strategy

Your fund assigns you an investment strategy based on your age, and then changes it as you get older. Younger workers are given strategies that emphasise growth assets

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

You can withdraw your superannuation (or at least some of it) when you reach ‘preservation age’. The preservation age is based on date of birth. Here are the six different categories:

When you reach preservation age, you can withdraw all your superannuation if you’re retired. If you’re still working, you can begin a ‘transition to retirement’, which allows you to withdraw 10 per cent of their superannuation each financial year.

You can also withdraw all your superannuation once you reach 65 years.

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

• Age 65
• Your ‘preservation age’ and retire
• Your preservation age and begin a ‘transition to retirement’ while still working

The Australian Prudential Regulation Authority (APRA) regulates ordinary superannuation accounts. Self-managed superannuation funds (SMSFs) are regulated by the Australian Taxation Office.