Superannuation is a long term saving structure designed to provide a person with money in retirement.
The funds cannot be accessed until the person retires or a release condition is met.
Contributions into superannuation funds are made by employers, employees and self-employed individuals into superannuation funds. Sometimes the Government will add to it through co-contributions. Superannuation funds are run by trustees. Each fund has their own rules and terms under their constitution, but must also follow government rules which are designed to ensure all superannuation is properly managed.
Over time, your superannuation contributions build into a larger sum that earns investment income and continues to grow for your retirement. There are also tax benefits applying to superannuation investments.
When you retire, this money is paid to you as a lump sum or a superannuation pension or it can remain in superannuation, if you choose. Having your own superannuation will mean a more comfortable lifestyle when you retire.
Superannuation investments include:
- superannuation funds - Retail, Industry, Corporate or Employer and Public Sector
- self-managed Superannuation Funds and Small APRA Funds, and
- retirement savings accounts
Income streams such as an annuity or a pension, although technically a superannuation product, are not covered by these rules.
Treatment of superannuation and rollover investments
If you are under age pension age, your superannuation investments are usually disregarded for income and assets test purposes. When you or your partner reach age pension age, whether you receive Age Pension or another payment, superannuation investments are:
- included as assets under the assets test, and
- regarded as financial investments. They are added to the value of other financial investments and all financial investments are deemed to calculate income
We will use the balance from your latest member statement to determine the asset value of your superannuation and then use this value in working out the amount of income to be deemed for this investment.
If you have reached age pension age and your partner has not, your superannuation will be assessable however your partner’s superannuation will not be assessable until they reach age pension age.
In certain circumstances where you or your partner are of age pension age and you are unable to access your superannuation investments, an exemption may be allowable if certain conditions are met.
Withdrawing superannuation investments can affect your income support payment
The amount withdrawn is not treated as income under the Social Security Act. However, what you do with the money may affect the rate of your pension or allowance. For example, if the money was used to purchase an income stream, then the applicable income and assets test assessment would apply. If the money was placed into a bank account, it would be assessed as an asset and income determined using the deeming rules.
Accessing superannuation money before retirement
Superannuation money can generally only be accessed if the status of the fund is non-preserved. The preservation rules were introduced to ensure that superannuation money is available once the person reaches preservation age and retires from the workforce. Preservation age is generally the age that you can access your superannuation benefits. The preservation age is 55 for people born before 1 July 1960. The preservation age increases by small amounts for people born after this date, until the preservation age for people born after 30 June 1964 is 60.
Early access may be possible on specific compassionate grounds or under the severe financial hardship rules under the Superannuation Industry Supervision (SIS) Act.