Retirement payments in Australia are of two forms. First is an old age pension funded by taxpayers through the government. To qualify for the old age pension, one has to have lived in Australia either as a resident or a citizen for a minimum of 10 years. The second is superannuation which is a contribution from an employee’s salary to a retirement fund. The employer must deduct 9% of the employee’s income for their superannuation account. However, the employee is permitted to contributed above this proportion if they so wish. The superannuation must be registered with and have the approval of the federal government.
Two approaches are usually used when deducting superannuation contributions – some employers will separately pay out the superannuation as separate from total remuneration while have it as a deduction from the salary. This is a particularly important point to be clear on if are applying for immigration to Australia. The pay package an employer offers must be clear on whether it includes or excludes the superannuation contribution.
Superannuation funds invest in a mix of equities and fixed income. More than 75% of Australian employees have their superannuation contributions in an equities-heavy fund. An equities-heavy fund has 66% of the funds invested in equities and the balance in fixed income securities. The rationale is that equities always outperform fixed income instruments in the long term. But as employees near retirement, common practice is to have the proportion of investment in equities reduced and a large amount of the contribution placed in the less risky fixed income instruments.
Access to superannuation funds by persons above 60 years of age is tax free. However, withdrawal before then is subject to tax. The total superfund amount available to each person will vary from one person to the next depending on the amount contributed (a factor of one’s salary over the years) as well as the performance of the superannuation fund itself.
Tax funded old age pension payments though have a cap – the maximum amount single persons are entitled to is AU$ 17,400 per annum and while for couples the ceiling is AU$26,300 each year. The actual amount of old age pension that each person is entitled to is determined by an asset and income test. If a person is single but has assets that are below AU$178,000, then they are entitled to a full old age pension. The same applies for couples whose total assets are below AU$ 252,000 in value.
If you are working in Australia on a temporary visa but have to go back to your country once your work contract ends and visa expires, you need not lose your superannuation funds. Such scenarios are handled through the DASP (Departing Australia Superannuation Payments) program. However, an application to DASP would only be considered valid if your temporary visa has expired and you have already departed from Australia.
References:
http://www.immi.gov.au/allforms/superannuation/
