Super jargon explained

books open on top of each other

Although it’s constantly reported on in the media, many Australians do not fully understand superannuation jargon. We’ve identified some of the most common terms and explain them in language everyone can understand.

Term Explanation
Account Based Pension Also known as an ‘Allocated Pension’. An investment account established with a lump sum from a super fund from which a regular or irregular income is drawn.
Annuity An investment bought (usually at retirement with superannuation money) to provide regular income.
Asset An investment product; it can be cash, shares, fixed interest or property.
Benefit The amount of money saved in a retirement account which is accessible after meeting certain government imposed conditions such as retirement.
Choice of super Your right to choose the superannuation fund you wish to put money in to.
Contribution The money put into a superannuation fund by you or your employer.
Co-contribution The money the government puts into your superannuation fund if and when certain conditions are met.
Concessional contributions Money you put into a superannuation fund yourself (see personal contribution) for which you are eligible to claim a tax deduction. Concessional amounts are taxed at 15% (see Contributions tax).
Contributions cap Government imposed limits on the amount of money that can be put into a superannuation fund each financial year. The limit can change from year to year.
Contributions tax A once-off 15 % tax levied on all employer and personal concessional contributions at the time the money enters the super account.
Defined benefit A superannuation account where the amount at retirement is calculated using a formula based on your final salary and years of employment.
Non-concessional contributions Money you put into your superannuation account yourself that you have already paid tax on, such as your after-tax salary.
Pension An investment purchased with superannuation money which provides regular income in retirement.
Personal contribution Any money you put into your superannuation account yourself. These are usually Concessional contributions or Non-concessional contributions.
Preservation age The government prescribed age at which you are able to access your superannuation money provided you meet certain other criteria.
Return The amount of money your superannuation account earns while invested.
Risk The chance that your investment may fall in value.
RSA Retirement Savings Account. An alternative superannuation product usually offered by institutions like banks or building societies.
Salary sacrifice An arrangement where you put a certain amount of your pre-tax (gross) salary into superannuation. This reduces your take-home pay but may have tax advantages. Contributions tax of 15 % will still apply.
SG Superannuation Guarantee. The amount of money employers must contribute to employees’ super funds. The rate is 9.5%pa. These contributions are classed as Concessional.
Spouse contributions Amounts of money you contribute to your spouse’s superannuation account. These contributions are classed as Non-concessional, they do not attract contributions tax, and you cannot claim a tax deduction for them.
Transfer balance cap A limit on the total amount of superannuation that can be transferred into the retirement phase. If you breach this limit you must either remove the excess funds or pay an excess transfer balance tax.

 

Apart from the family home, superannuation is probably the largest asset many people will own. In reality, it can be quite straightforward, but until super terminology is simplified, it will most likely keep the majority of Australians baffled.

 

Bottrell Wealth

ABOUT THE AUTHOR

Bottrell Wealth
Bottrell Wealth are expert financial planners, with a vast array of experience with businesses of all shapes and sizes. Our knowledge extends past financial planning into, accounting, taxation, marketing and recruitment. With over 20 years dealing with businesses and individuals, Bottrell Wealth can help you reach your goals!

Leave A Comment