What is Superannuation?

What is Superannuation? Superannuation is a vehicle saving for retirement in a tax-effective manner. Superannuation is Australia’s own little ‘tax haven’. This is place to build up savings for retirement in a tax effective way. All income and capital gains received from assets within superannuation are taxed at a maximum of 15%. Superannuation is a trust structure. This means that a trustee is responsible for the management of benefits on behalf of its members. Each member will have a member balance (account). This member balance is either in ‘Accumulation Phase’ (pre-retirement) or ‘Pension Phase’ (post-retirement).

What’s the catch of investing in Super?

Any amount that you or someone else, such as your employer, has contributed into your superannuation account will be inaccessible until you meet a condition of release. Some examples of a condition of release are:

  • Permanent retirement after your preservation age
  • Reaching age 65
  • Ceasing an employment arrangement after age 60


What does my superannuation invest in?

You can invest your superannuation savings in almost anything you like (subject to legislation and regulations). The type of superannuation account that you will determine what investment options are available to you.

Why should I invest in superannuation?

Here are some reasons as to why you would invest in superannuation

  • You have savings that you do not expect to need access to prior to retirement
  • You would like to reduce your income tax by making deductible contributions to superannuation and are comfortable that you will be unable to access these contributions until retirement
  • You would like to receive the Government Co-Contribution
  • You like the idea of forced savings for retirement
  • You would like to reduce the tax payable on your investment earnings
  • As a rule of thumb, investing in superannuation is only tax-effective if your highest personal marginal tax rate is greater than 15%

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What is Superannuation Tax?

All earnings received from investments within superannuation receive concessional tax treatment. The maximum tax on earnings in Accumulation Phase is 15% – reduced by 1/3rd for capital gains on the sale of assets held for longer than 12 months. In Pension Phase, all investment earnings are completely tax free. This can result in significant tax advantages when compared to having investment earnings taxed at your MTR. Your member balance is made up of a ‘Taxable’ component and a ‘Tax-Exempt’ component. In Accumulation Phase, the Taxable Component is made up of investment earnings and contributions where a tax deduction has been claimed, known as Concessional Contributions (e.g. salary sacrifice, personal deductible). The Tax-Exempt Component is made up of after-tax contributions, known as Non Concessional Contributions. In Pension Phase, the proportion of components remains static based on what the proportions were at commencement of the pension income stream. Making Concessional Contributions  by way of salary sacrifice or personal deductible contributions is beneficial as it reduces the amount of income taxed at your marginal tax rate (MTR), or provides you with a tax deduction, which then reduces your taxable income – for the same end result. https://www.youtube.com/watch?v=b7zQQNkTkzI There are various types of superannuation accounts where you can invest your savings. These are:


Industry funds are typically low cost superannuation accounts linked to a particular industry. These funds are often the default funds if you are employed in a particular industry. For example, certain funds are designed to accommodate health care workers, the motor trade industry, construction workers, those in hospitality, etc. Most fees are payable as a percentage of your balance and a small weekly administration fee.


Retail funds tend to be a little bit more expensive than industry funds; however are becoming more competitive all the time. Retail funds provide a much wider range of investment options compared to industry funds, allowing you to put in place a more focused and personalised investment strategy. In most cases, the funds offer you access to ASX Listed shares and dozens of managed funds. Similar to industry funds, fees are charged as a percentage of your balance.


Corporate funds are employer linked funds that an employer has chosen to be the default fund for their employees. The employer can easily manage the account as all of their employees will fall under their umbrella – simplifying the contribution process. It also provides their employees with group discount benefits on things such as insurance and reduced administration and investment management fees. Corporate funds are similar to Retail funds. Again, fees are charged as a percentage of your balance. Here is a list of  many Industry, Retail and Corporate superannuation providers.   What is Superannuation


SMSF’s are superannuation funds that have fewer than 5 members and are run by the members themselves. In fact, every member of a SMSF must be a trustee (or director of a corporate trustee) and every trustee must be a member. The establishment and ongoing management of a SMSF is often done with the assistance/guidance of an adviser and/or accountant. A SMSF often has higher costs than all other superannuation accounts, however such costs are fixed. This means that as balances reach over $1,000,000, the fees, expressed as a percentage will likely be lower than the other types of funds. SMSFs offer the most flexibility with regards to investment options and allow you to invest in direct property. Care must be taken with SMSFs, as the require great responsibility and severe penalties may be incurred for non-compliance.


Superannuation is a vehicle that allows you to save money for retirement in a tax-effective manner, due to the tax-concessions available. Tax concessions are provided as an incentive for more people to self fund their retirement, which ultimately reduces the stress on the Government to fund peoples retirement. This is especially important due to our ageing population that has resulted from the baby boom.

Many superannuation accounts have similar names. It is always a good idea to know you superannuation product identification number (SPIN), as this is a unique number to your fund.

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Chris Strano

Hi, I hope you enjoyed reading this article. If you want my team and I to help with your retirement planning, click here. If you prefer a DIY approach, then check out the SuperGuy HUB. Thanks for stopping by - Chris.

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  1. Karen Key

    Hi, I’m 61, lived in Australia 4 years, work full time, make concessional contributions of $25K/year through salary sacrifice. I am not a home owner. Have $100K savings. Question – would savings be better off transferred to super as interest earned is low and I am taxed on it. Thanks for your advice.

    • Chris Strano

      Hi Karen
      A few things to consider:
      1. Amounts contributed to super are not fully accessible until you meet a superannuation condition of release (e.g. retirement or reaching age 65)
      2. The tax rate on earnings from investments in superannuation accumulation phase is up to 15%. Compare this against your personal tax rate.

  2. Linda

    Hi Chris
    I’ve reached my preservation age and would like to officially retire to access super benefits. Reading your website I’m thinking I’ve already retired as I have only been doing casual replacement work which on average would be less than 10 hrs a week. My accountant has told me that I need to create a retirement event by taking myself off the payroll of my current employer. It doesn’t make sense to me after reading your website. I have no intention of returning to either full or part time work but would like to continue this very casual arrangement.

    • Chris Strano

      Hi Linda, for a person who has reached their superannuation preservation age, they are taken to be retired if an arrangement under which the person was gainfully employed has come to an end after reaching their preservation age and never intends to work again on a full time or part time basis. However, the ATO has stated that simply reducing working hours with the same employer does not constitute ‘gainful employment coming to an end’. Your accountant understands your personal situation and would be better than this website in helping you navigate through the condition of release rules.

  3. Moh


    I am 57yo and reached my preservation age. If I now contribute 100k for example into a supervas a lump sum would it be taxed at 15% at the beginning and I will only end up with 85K?
    I intend to retire at 65 and take benefits as a super pension.

    Thank you

  4. Susi

    Hi I’m looking at buying my business which I have had for nearly 12 months of financials, I’m only 44 yrs of age and this will be my principal place of residences. Can I plse use my super for the business deposit and repay it once I have had 2 yrs of financials plse

  5. Gerry

    Hi, I have retired. I have built a super amount during my work life with contributions from both my employer and my own. I went on to the pension phase at 63 yo and I live on an Income stream from a complying super fund. Last year (2018-2019) I made some after-tax personal contributions and the super fund amalgamated the new contributions with the pension account and created a new pension account.

    In mid-April 2020 when the market went sharply down because of the pandemic, I made partial withdrawals from the super fund which I invested into a term deposit. The super fund has deemed my withdrawals as “Commutation- half balance”.
    My question is: Are these withdrawals Lump-sum? Are they taxable?

    • Chris Strano

      Hi Gerry,
      Generally, lump sum super withdrawals for an individual over age 60 are received completely tax free.
      You should confirm this with your super fund and accountant.
      Related Posts
      Lump Sum Withdrawals Over Age 60



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