Superannuation is a type of pension fund that is created for employees when they become employed for a company. The contributions to this pension fund are made by both the employer as well as the employees. The idea behind superannuation is that the employees can have some kind of income to rely on when they retire. Superannuation is considered partly compulsory for companies and businesses in Australia. This means that the government requires the employer to contribute a fixed percentage of an employee’s salary to this pension fund. There are tax benefits offered to further encourage both the employers and the employees to contribute regularly to the superannuation fund.
How Superannuation Works
Superannuation funds are collected in a separate account made under the employee’s name. The contributions to the fund can be made by both the employers as well as the employees. However, in the case of the employers, the contributions are compulsory. Employers need to contribute a fixed percentage of an employee’s salary to their superannuation fund. This isn’t the case for employee contributions, though. They can choose to contribute as much as they want, if they want this, these personal contributions have a cap that they can’t exceed. The amount in the superannuation fund is invested by the government and any earnings made through these investments are added to the fund as well.
Benefits of Superannuation
The most important benefit of superannuation is designed to help the employee. This initiative was taken to ensure that employees aren’t left with no income stream when they retire. It can help retired people live a comfortable life after their working days are done. The superannuation fund doesn’t get activated until you have retired, however. Once you stop working altogether and have reached the required retirement age, you will be allowed access to the funds in your superannuation account. Another benefit of superannuation is for employers. It provides them tax benefits which can help them save some money on their tax expenses.
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