This webpage covers a very complex topic in a simplified way, which means that it only covers the main points and it does not cover every rule. So be aware that sometimes the simplified explanation on this page will not cover your particular financial situation. Please read out disclaimer before you use any information on this website.
Superannuation Explained - An Introduction
Many of us think about superannuation as either:
that money we can't touch until we retire or
that money we need to fund our retirement living expenses.
While the rules around superannuation can be complex, superannuation is nothing more than that - money locked away until retirement, to be used in retirement.
However, people often think it is more than that. For example, people often talk about superannuation as if it is an asset class (e.g. cash, shares, property and superannuation). This is not true.
Superannuation is not an asset class.
Superannuation is simply money locked away until retirement, to be used in retirement. Your superannuation could be invested in anything from cash, to shares to property-and in any combination. You and your adviser can agree on the investment combination that is best for you.
If your superannuation fund is doing well or doing badly, this is probably because of the investments your superannuation is invested in. If your superannuation is invested in shares, your superannuation will go up and down with the share market. If your superannuation is invested in cash, your account balance will not move a great deal but will simply grow as interest is earned. So superannuation is not an asset class, but your superannuation money will be invested in one or more asset classes (e.g. cash, fixed interest, shares, property).
Superannuation is a good way to save tax.
One of the reasons superannuation is so popular is because you can save a lot of tax. You can save tax by putting money into super, save tax on the investment earnings and, if you wait until you are 60, you pay no tax when you get the money out. Past and present Commonwealth governments have used tax incentives to encourage the use of superannuation to much success.
Superannuation Explained - In More Detail
We would really like to explain how superannuation works in a few short paragraphs. But in reality, no-one can do this because it is simply too complex. However, we have made our explanations as simple as we can.
Below, there are a number of links to pages which answer frequently asked questions.
- The frequently asked questions are marked (1), (2), (3)...
Sometimes, the answer to a frequently asked question requires you to understand some background topics. If an answer has background topics, these will be at the top of the page.
- The background topics are marked (A), (B), (C)…
That way, you do not have to read our entire website, but just the bits you need-so choose a topic below and get started.