Small Business Tax Dictionary
Superannuation
Superannuation is a government-mandated retirement savings programme in Australia. The system operates through contributions from both employers and workers to investment-based retirement funds.
How superannuation works
Employers must contribute a percentage of an eligible employee's earnings to a superannuation fund — a requirement known as the Superannuation Guarantee (SG). The minimum SG rate is set by law and has been gradually increasing over recent years.
Individuals also have the option to make additional voluntary contributions, known as:
- Salary sacrifice — pre-tax contributions made through payroll
- After-tax contributions — voluntary contributions from take-home pay
The funds are invested by the superannuation fund into a mix of assets (shares, property, fixed income) to grow over time, with the goal of generating retirement income.
When can you access your superannuation?
Superannuation is generally preserved until you reach your "preservation age" (currently between 55 and 60, depending on when you were born) and meet a condition of release such as retirement.
Superannuation for small business owners
As a small business employer, you must:
- Pay super contributions for eligible employees at least quarterly
- Pay contributions into the employee's chosen super fund
- Keep records of contributions paid
If you are self-employed, you are not legally required to make super contributions for yourself, but doing so can reduce your taxable income and build your retirement savings.