Superannuation for dummies, 2nd edition

Superannuation For Dummies® Table of Contents Introduction About This Book How to Use This Book Foolish Assumptions How This Book Is Organised Part I: What Is Super, Really? Part II: Super — Your Ticket to Ride Part III: Taking Control Is a Piece of Cake Part IV: Hey, Don’t Forget Your Retirement! Part V: The Part of Tens Part VI: Appendixes Icons Used in This Book Where to Go from Here Part I: What Is Super, Really? Chapter 1: Relax, Super’s Here to Stay Understanding the RIPper Plan behind Super Investing for the Long Tomorrow Introducing the Eight-Step Program to Super Success Confronting SUPERstitions ‘Super is too complex’ ‘Super is taxed too much’ ‘My super’s going to disappear in fees’ Opting For a Tax-free Retirement Chapter 2: Looking into Your Future Retiring Isn’t That Far Away Facing Four Facts about the Future Living longer — ageing in comfort Straining the Government Age Pension Staying healthy costs more Expecting a reasonable lifestyle Planning for Your Long-Term Lifestyle Living the Life of Riley in Retirement Dreaming the fairytale Grasping the reality Taking the ostrich option Getting serious about it Saving the Super Way Safe as houses Investing outside of super Banking on term deposits Chapter 3: Spotting a Super Fund in the Wild Discovering Six Fund Types on Your Super Safari Recognising Your Super Type from a Distance Being close to home — your employer’s fund Chasing safety in numbers — industry fund (not-for-profit) Shuffling the pack — retail fund (for profit) Becoming a public sector fund member Doing-it-yourself — DIY super fund Taking refuge — Retirement Savings Account (RSA) Appreciating a Super Fund’s DNA Putting a super fund under the microscope Passing the ‘complying fund’ test Tapping into admin, admin, admin Introducing super’s other little helpers — fund managers and more Comparing Accumulation with Defined Benefit Carrying the risk and earning the reward Protecting a rare species — defined benefit funds Chapter 4: Choosing a Super Fund Do You Have Super Fund Choice? Changing jobs, choosing a fund Nothing to choose, for some Identifying Your Super Choices Handing over your super to the experts Delving into DIY super Trusting a Fund’s PDS Profiling a Super Fund — Your Super Choice Toolkit Checking Out the Super Competition Relying on rating companies Seeking financial advice Leaving for Greener Pastures Protecting your insurance cover Avoiding higher fees Losing out on extra employer contributions Completing the Standard Choice Form Providing new fund details to your employer Chapter 5: Nothing Beats Super Advice Seeking Information Before Advice Starting with your super fund Asking your employer Removing the Con from the Content Costing your advice Critiquing commission advice Choosing a Licensed Adviser Checking out that adviser Using a financial planner Checking if your fund provides advisers Approaching Super’s White Knights Wagging the watchdog tail Liaising with industry types Did you say independent, and free? Getting Your Super Beef Sorted Out Understanding the complaints process Taking your complaint further Part II: Super — Your Ticket to Ride Chapter 6: Getting Super Fit — Your Start-Up Kit Taking Your Super Physical Exercising your rights when joining a fund Filling in fancy forms the right way Keeping your paperwork up to date Getting Compulsory Super Training — Employer Contributions Giving nine every time — SG contributions Scoring SG four times a year Identifying additional employer contributions Keeping an eye on your employer Signing Up for Your Advanced Super Workout — Voluntary Contributions Making after-tax contributions Contributing before-tax dollars Contributing for your spouse rebate Splitting contributions with your spouse Chapter 7: Becoming Friends with Your Super Fund Getting the Lowdown on Your Fund Chatting to your payroll officer Reading the info from your super fund Checking out your fund’s Web site Taking advantage of your fund’s helpline Attending your fund’s seminars Who’s Looking After Your Super Piggy Bank? Do you know your trustees by name? Identifying a quality trustee board Managing your super money Understanding Your Member Statement Reading the headlines Navigating your way around your statement Keeping Your Super Safe Identifying the cops and robbers Losing your super doesn’t make cents Finding your ‘lost’ super Chapter 8: Exploring the World of Super Investing Understanding the Basic Ingredients of Super Investing Classifying your assets Suffering a super identity crisis Setting up your super future in four steps Investment Choice — Is Your Fund Offering a Fixed Menu or Open Buffet? Checking whether your fund serves an open buffet Researching the best dishes from the investment buffet Defaulting on your investment choice Desperately Seeking Super Performance Investing for the long tomorrow Deciding on a performance benchmark Relying on past performance Seeking glowing reviews on your fund’s performance Chapter 9: Keeping Watch Over Those Fees Finding Out the Facts about Fees High fees reduce your benefit Combining your super accounts Protecting small account balances Appreciating Funds with Lower Fees Running for profit, or not Paying wholesale is cheaper Understanding Your Super Fund’s Fees Receiving fee information in plain English Checking out your fees in your member statement Unlocking the Secrets to Hidden Fees Calculating Your Super Fees Chapter 10: Cheaper Insurance and Other Benefits Protecting Your Lifestyle and Your Life Putting a value on your life and lifestyle Counting the cost of living Choosing Among Three Types of Insurance Insuring your life Insuring your body Insuring your income Relying on Your Employer’s Choice Claiming Insurance Benefits Paying super tax rates Making an insurance complaint Visiting Your One-Stop Super Shop Taking advantage of super home loans Accessing cheaper financial products Part III: Taking Control Is a Piece of Cake Chapter 11: Six Super Contribution Strategies When Before and After Matters Choosing before- and after-tax contributions Before and after the age of 65 After turning 75 Adding After-Tax Contributions Entering a tax-friendly environment Bringing forward your limit Talking tough on limits Catering for special categories Beefing Up Before-Tax Contributions If the cap fits … Claiming a tax deduction Reducing CGT While Boosting Super Taking Advantage of Salary Sacrifice Getting your arrangement in place Sacrificing your Superannuation Guarantee Sacrificing the right salary amount Weighing up the benefits of your sacrificial offering Joining the Co-Contribution Club Checking the membership requirements Receiving your bonus contribution Splitting Super with Your Spouse It takes two … Splitting super straws Chapter 12: Taxing Your Super While You’re Working Entering the Super Tax Maze Paying Less Tax than Your Marginal Rate Reducing Income Tax the Super Way Making non-concessional contributions Sacrificing your salary Claiming tax deductions for contributions Taking It One Tax at a Time Copping contributions tax Handing-over-your-earnings taxes Leaving-your-fund-before-you-turn-60 taxes Super Survival — Changing Jobs or Taking Breaks What about redundancy? Taking employment termination payments Transferring benefits from overseas Chapter 13: Setting Up Your DIY Super Fund Take Your Pick — the ATO or APRA Considering whether DIY Super Is Right for You Trying on DIY for size Taking the Super C Quiz — Your DIY roadworthy Costing the Running of Your Fund Kick-starting your fund Running your fund Practising DIY Compliance Makes Perfect, Nearly Monitoring the must-dos Drafting your fund’s trust deed Applying the sole purpose test Drafting your investment strategy Keeping financial records Auditing your SMSF Committing Long-Term to Your SMSF Chapter 14: DIY Super and Investing Committing to Your DIY Super Fund — a Life and Investment Decision Building Your DIY Super Fund Portfolio Setting the framework — your DIY super fund’s investment strategy Identifying your goals — your DIY super fund’s investment objectives Getting into position — your DIY super fund’s asset allocation Investing Directly versus Managed Funds Hand-Picking Your DIY Super Fund’s Investments Being direct on property Investing in your office or factory Investing in shares Taking it easy on exotic investments Transferring assets into your DIY super fund Walking the Investment Tightrope Keeping your investments at ‘arm’s length’ enterprise bargaining agreement: See Certified Agreement equal representation (or equal representation rules): Trustee boards consisting of equal numbers of employer representatives and employee representatives, or an alternative arrangement that meets the principles of giving members and employers an equal voice in the running of the fund estate: A term that means any assets that a person owns ETP (employment termination payment): Certain payments from an employer to an employee upon termination of employment exempt amount: An amount based on the pension’s purchase price and the life expectancy of the person receiving the income stream This amount isn’t counted when assessing whether a person satisfies the Centrelink income test ex gratia payment: A gratuity or payment for other than legal obligation exit fee: A fee charged by a fund upon withdrawal or transfer of a benefit Fee Comparison Table (FCT): The FCT provides consumers with a snapshot of the dollar cost of being a member of a super fund for a single year FIDO: The investor and consumer Web site of the Australian Securities and Investments Commission FIDO Superannuation Calculator: The calculator enables you to forecast the effect on your super of making extra contributions, receiving contributions under the Government’s Co-contribution Scheme, paying lower fees or even stopping contributions for awhile financial agreement: An agreement dividing property other than superannuation in the event of a marriage breakdown financial assets: Assets that people invest in, and that a value can be placed on They’re divided into broad categories called asset classes financial audit: An audit intended to be independent verification that a fund’s accounts are accurate Financial Information Service (FIS): A not-for-profit financial education and information service that’s available to anyone financial services guide (FSG): A document that can assist you in deciding whether to use the services of an adviser The document explains what services the adviser offers, how she operates, how the adviser gets paid (including any commissions), how she deals with customer complaints, and any interests, associations or relationships that might influence the advice the adviser gives Financial Services Reform Act 2001 (FSR Act): An Act of Parliament that created tougher licensing requirements and increased disclosure required by advisers and product providers such as financial organisations fixed interest investments (or fixed interest or bonds): Relatively low-risk investments that are effectively like term deposits, but not necessarily as secure A person gives money to a bank, company or Government and, in return, it promises to pay the person a certain amount at set periods and repay the original amount after an agreed period of time These investments can be traded before they’re due to be repaid flagging: Deferring a decision regarding a super benefit on a breakdown of a marriage, until a later date The trustee of the super fund can’t deal with the super account until the ‘flag’ is lifted franked dividends: Dividends that are paid by Australian companies and on which 30 per cent tax has already been paid Recipients of these dividends are entitled to franking credits franking credits: Pre-paid tax on franked dividends from shares This pre-paid tax can count towards any other tax that a super fund has to pay, reducing any tax payable on taxable contributions or capital gains fringe benefits: Items such as cars, low-interest loans and car parking, that individuals may include in salary packages fringe benefits tax: One of those johnny-come-lately taxes that the Australian Government introduced to claw back taxes lost due to workers reducing the income tax they paid by packaging fringe benefits fund choice: A person having a say over what type of superannuation fund he can join Fund choice is different from investment choice, which means a person has a say over where a fund invests his super money geared managed fund: A managed fund that borrows money and then invests that money alongside investor’s money in the fund genuine redundancy payment: A payment that represents the amount that exceeds what that person who has been made redundant would have received had he voluntarily resigned in other circumstances governing rules: See trust deed gross income: Income before any tax is deducted growth assets: A type of asset, such as shares or property that usually delivers higher returns over the longer term than income assets, such as cash or fixed interest investments growth option: See balanced option growth pension or annuity: See term-allocated pension guaranteed payment period: A period of time that another person can continue to receive income payments, or a lump sum, after the person originally receiving the income stream dies hedge fund: See absolute return fund income protection insurance (or salary continuance insurance): Insurance cover to provide a regular income for a policyholder if she becomes disabled or sick for an extended period of time income stream: A series of regular payments over a period of time, just like being paid wages or a salary Most people have a choice of taking their super as an income stream or as a lump sum index manager: A type of investment manager that builds a portfolio to match the returns of an index, such as the ASX200 index indexation: A method of adjusting thresholds or prices by linking them to a certain measure such as inflation or a rise in wages The aim of indexation is to reflect amounts in today’s dollars indexed: Any income levels or rates or amounts that are adjusted annually in line with increases in average weekly earnings or inflation or another measure indexed income stream: See indexed pension indexed pension: An income stream that increases in line with inflation or increases in average weekly earnings industrial agreement: A formal agreement similar to an industrial award industrial award: A formal arrangement that sets out conditions of employment and often includes a provision stating that super must be paid into a particular fund industry funds: A type of fund that usually caters for workers from a particular industry, although many of these funds are now available to anyone See public offer funds infrastructure: The construction and operation of toll roads and bridges, and other utility services in-house asset: An investment in, or a loan to, an entity related to the super fund, or to a fund member or a relative of a fund member, or a related party in specie contribution: A non-cash contribution to a super fund; for example, transferring the title of an office into the name of the fund’s trustees or transferring ownership of shares instalment warrant: A purchase of a share under an instalment plan The fund or person takes ownership of the share immediately and receives dividends interdependency relationship: A close personal relationship between two people who live together, where one or both provides for the financial and domestic support, and care of the other This definition can include a same-sex relationship, parent–child relationships that don’t fall within the definition of death benefits dependant, and sibling relationships interest split: A phrase that means to divide a super account (after a marriage breakdown) when the interest can’t be cashed yet because a condition of release hasn’t been satisfied, giving both parties a super interest invalidity component: An invalidity payment known as a concessional component or a post-June 1994 invalidity component investing: The act of purchasing an asset or an interest in an asset investment choice (or member investment choice): A feature of a fund through which a member has a say over where his super fund invests his super money investment income tax: Tax payable by a super fund on assessable income, including a fund’s investment income investment manager: An investment specialist hired by a trustee to invest super money on the trustee’s behalf investment strategy: A formal plan identifying the super fund’s financial goals (investment objectives) and the fund member’s tolerance for risk and the investment time horizon licensed adviser: An adviser that has satisfied specified criteria and certain standards under the Financial Services Reform Act 2001 Only licensed advisers can call themselves a ‘financial adviser’ or a ‘financial planner’ life expectancy (or life expectancy rate): A statistically based average of the number of years a person is expected to live Statisticians can measure life expectancy at birth or during a person’s life life expectancy age: You’re expected to live to this age, on average life expectancy pension (or life expectancy annuity or life expectancy income stream): A guaranteed income stream for a fixed period representing a person’s life expectancy life insurance: See death cover lifetime income stream: See lifetime pension lifetime indexed pension (or income stream): An indexed pension payable for life Many lifetime pensions also pay a reversionary pension lifetime pension (or lifetime annuity): A guaranteed income stream for a person’s lifetime and maybe the spouse’s lifetime too limited recourse: The maximum that you can lose is your original capital investment liquidity: The ability of a super fund to pay taxes, expenses and members’ benefits longevity risk: The chance of a person outliving her retirement savings lost member: A member whom a super fund is unable to contact Lost Members Register: A central register keeping records of lost members and their super accounts Low Income Tax Offset (LITO): A tax offset available to all taxpayers on lower incomes low-rate cap: A lifetime limit that applies to superannuation lump sums paid from a taxed benefit after the age of 55 but before the age of 60 managed fund: A financial product where the money of many investors is pooled into one investment vehicle and the assets are invested according to a single investment strategy margin lending: Borrowing money to invest in shares marginal tax rate: The highest rate of income tax that a person pays on income The more a person earns, the higher the marginal tax rate market-linked income stream: See term-allocated pension market-linked pension: See term-allocated pension master trust: An investment vehicle that pools money from individual investors or individual superannuation funds and invests this money into one or more underlying investment vehicles maximum superannuation contribution base: An indexed limit, up to which an employer can contribute per cent of an employee’s salary If a person’s income for Superannuation Guarantee purposes exceeds this base, the employer makes contributions on the basis of the maximum superannuation contribution base means testing (or means test): An assessment of any resources a person may have available to support himself In relation to the Age Pension, whether a person already has enough money and resources to look after himself Medicare levy: A tax that the Federal Government imposes on Australian taxpayers to help fund the country’s public health system member contributions statement: a special form your super fund must lodge with the Australian Taxation Office and that details all contributions to the fund member investment choice: See investment choice member protection rule: A requirement that super funds must follow and that means a super fund’s annual administration fee can’t be greater than the investment return credited to a member’s account, if the account balance is less than $1,000 member statement: An annual summary of a member’s benefits in the super fund, including how much money is in the member’s super account and contributions made during the year multi-sector investment option: An investment portfolio in two or more asset classes, such as shares, property, cash and fixed interest National Information Centre on Retirement Investments (NICRI): A free confidential service funded by the Federal Government that provides independent information on planning, saving for retirement and post-retirement investing Newstart Allowance: The official name for unemployment benefits nil contribution fee option: A fee choice offered by a retail superannuation fund to a member This choice means a member pays no upfront fee on super contributions, but gets hit with a higher withdrawal fee and higher ongoing fees than the contribution fee option nominated beneficiary (or nominated beneficiaries): A person (or persons) whom a fund member nominates to receive the super if the member dies Anyone nominated must be a dependant or a person’s legal representative non-binding nomination: A type of nomination that helps the trustee to decide who is eligible for a death benefit, especially when a lot of people may claim to be financially dependent non-commutable income stream: An income stream that can’t be converted into a lump sum payment non-commutable lifetime pension (or annuity): A lifetime pension (or annuity) that can’t be converted to a lump sum amount non-concessional contributions: After-tax contributions including spouse contributions and contributions made under the Super Co-contribution Scheme non-concessional contributions cap: The level of non-concessional contributions that can be made each year before penalty tax is payable non-dependants: Individuals who aren’t dependants and, ordinarily, can only receive a death benefit when first paid to the deceased member’s estate non-preserved benefit: A benefit that is either restricted or unrestricted non-resident: Anyone entering Australia on an eligible temporary resident visa non-superannuation benefits: Benefits that super funds offer that aren’t retirement benefits or insurance For example, financial planning services and access to low-cost home loans and other banking products not-for-profit funds: Super funds such as industry funds, public sector funds and corporate funds OECD: Organisation for Economic Co-operation and Development Mainly European nations belong to the OECD online calculators: A calculator that’s accessed via the Internet, and that can be used to work out how much a person is likely to need in retirement, or how much life insurance he may need, or how much a fund charges in fees option: A right to purchase or sell a share or other asset at an agreed price at some time in the future payment split: Splitting a super account (after a marriage breakdown) when the benefit becomes payable, for example, on retirement pension: An income stream payable from a superannuation fund Pension Bonus Scheme (PBS) (or Pension Bonus): A tax-free payment representing 9.4 per cent of the Age Pension if a person defers claiming the Age Pension for at least 12 months pension offset: A 15 per cent pension tax offset is available against assessable pension income where superannuation money is used to purchase an income stream pension phase: The period during which a super fund pays an income stream or pension The alternative to a pension phase is the accumulation phase pension valuation factor (PVF): A figure used to calculate allocated pension payments PVFs are set by legislation and relate to a person’s age Pensioner Concession Card: A card that entitles Age Pensioners and other social security recipients to prescriptions at a lower cost, and discounts on public transport, rates and utility bills permanently disabled (or permanent disability): A term that means that the disability or illness must meet the definition of permanent incapacity under the superannuation laws personal contributions: A contribution that an individual under the age of 75 contributes to a complying superannuation fund See also voluntary contributions Pharmaceutical Allowance: The amount payable in addition to the Age Pension, to help out pensioners when purchasing medical prescriptions Pharmaceutical Benefits Scheme (PBS): A Federal Government plan that subsidises selected pharmaceuticals for all Australians, and also provides concessional prices on medication for those receiving social security payments, and for most senior Australians platform: See wrap account portability: The right to request the transfer of accumulated super benefits to another super fund portfolio: A combination of several assets, such as a conservative, balanced or growth option, rather than a specific investment post-30 June 1983 component: A term applicable to pre-July 2007 benefits This term represents that part of the super benefit generally representing employment before June 1983 A super fund, in accordance with tax laws, separates the benefit into taxed element and untaxed benefit post-June 1994 invalidity component: Applied to some pre-July 2007 benefits, and forms part of the tax-free component The component was part of a benefit payment that consisted of, or was attributable to, an invalidity payment (for permanent disability) made on or after July 1994, and the benefit was transferred into an individual’s current fund pre-July 1983 component: Applied to pre-July 2007 benefits This term represents that part of the super benefit generally representing employment before July 1983 preservation: A restriction that prevents a member from accessing superannuation benefits until retirement or until satisfying a condition of release preservation age: At least 55 years of age and can be up to 60 years of age Anyone born before July 1960, has a preservation age of 55 years preserved (or preserving): A term that means a person’s retirement benefit is locked away until retirement, or until a condition of release is satisfied preserved benefit: This type of benefit must remain in a super fund until the member reaches preservation age and, in most instances, retires from the workforce private equity: An alternative investment that involves investing in promising companies that aren’t yet listed on any sharemarket Product Disclosure Statement (PDS): A document that explains the features of a super fund, including an explanation of the investment options available (if any), who makes these investments on behalf of the fund, the risks associated with investing in each option, the importance of getting advice and the fund’s past investment performance A person must receive a fund’s PDS before he joins the super fund, and anyone can ask for a fund’s PDS by contacting the super fund property: A broad asset class encompassing office buildings, factories, shopping centres and other developments Super funds can either invest in these investments directly or indirectly, via listed property trusts proportioning rules: The rules that apply to benefit payments — an income stream or lump sum must reflect the proportion of tax-free and taxable components that make up the super benefit public offer fund: Anyone can join a public offer fund, but the fund must have an RSE licence Financial organisations, such as banks and insurance companies, usually market these types of funds to the public in the form of retail superannuation funds Many industry funds are now public offer funds public sector employees: A term that covers employees working in local government, the Commonwealth and State public services, public healthcare, and in Australia’s public universities public sector fund: A superannuation fund for public sector employees rating company: A company that evaluates and rates Australia’s largest super funds real property: Land and buildings, including houses, offices, factories and car parks real return (or real rate of return): Investment return after taking into account the effects of inflation reasonable benefit limit (RBL): Abolished from July 2007 The maximum amount of concessionally taxed benefits that a person can receive from the superannuation system over a lifetime regulated fund: One of the first things a trustee must when setting up a super fund is to ‘elect’ for the fund to be treated as a regulated fund, which means the fund is regulated by the Superannuation Industry (Supervision) Act 1993 residual capital value: A remaining balance of an income stream restricted benefit: A person’s benefit may include this type of benefit if she was a super fund member before July 1999 A person can cash this benefit when she resigns from an employer who is contributing to her super fund restricted non-preserved benefit: This benefit is restricted until a person leaves his job A person’s super may include this type of benefit if he was a super fund member before July 1999 retail superannuation fund: A retail managed fund that’s subject to superannuation laws and entitled to concessional tax rates on investment earnings These funds are run for profit by financial institutions such as banks, financial planning groups and fund managers Retirement Income Policy (RIP): A three-pronged Government strategy intended to save Australia from a funding crisis triggered by Australia’s ageing population retirement income stream: An income stream that produces regular income payments during a person’s retirement Retirement Savings Account (RSA): A superannuation account that’s similar to a savings account that banks and other financial organisations offer reverse mortgage: A loan that allows a person to borrow against the equity in his home The repayment of accumulated interest and the original loan amount is deferred until the property is sold, which can be after the person dies reversionary income stream (or reversionary pension or annuity): An income stream payable to someone else, for example a spouse or children, if a member dies risk profile: The level of risk a person is willing to tolerate rollover exemption: An exemption that permits a business owner to defer any capital gains tax payable on any capital gain from the sale of a business asset, provided that the business owner purchases another active business asset with the proceeds of the sale RSE (registrable superannuation entity) licence: A licence issued by the Australian Prudential Regulation Authority Most super fund trustees must hold such a licence to show they have sufficient risk management practices in place The ultimate intention of such a licence is to minimise the risk of a super fund losing members’ benefits RSE licensee: A company that holds an RSE licence: A special type of superannuation corporate trustee that runs superannuation funds, usually public offer funds salary continuance insurance: See income protection insurance salary packaging: A more precise term for describing the practice of reducing your taxable income by making superannuation contributions from before-tax salary (salary sacrificing) salary sacrifice (or salary sacrificing or salary sacrifice arrangement): Including before-tax super contributions as part of a salary package, which then reduces a person’s taxable salary and the amount of income tax payable same-sex relationship: A live-in relationship between two women or two men secure site: A Web site that a person can only access with a password self-managed superannuation fund (or DIY super fund): A small super fund that’s regulated by the Australian Taxation Office Senior Australians Tax Offset (SATO): A tax offset that’s available for retirees who are of Age Pension age or older or of Service Pension age Senior Concessions Allowance: A six-monthly tax-free payment to Commonwealth Seniors Health Card holders to help with regular bills such as electricity and gas, rates and motor vehicle registration fees separation declaration: A written document that must give details of a couple’s marital status, such as that a couple are married, and separated at the time of the declaration The document must be signed by at least one spouse Service Pension: A taxpayer-funded income stream payable by the Department of Veterans’ Affairs to a veteran who ‘served in operations against the enemy whilst in danger from hostile forces of the enemy’ Service Pension age: The age at which the Service Pension is payable to war veterans, which is five years earlier than the Age Pension Currently, the Service Pension age is 60 for men and between 58½ and 60 for women share: A unit of ownership in a company that entitles a person to a share of the profits in the form of dividends and the benefit of any increase in the share price because of the strong performance of the company small APRA fund: A DIY super fund that’s regulated by the Australian Prudential Regulation Authority, and the fund must have an RSE licence small super fund: A fund with four or fewer members, more popularly known as a DIY super fund socially responsible investing: An investment approach that selects companies on the basis of sound financial criteria and sustainability principles A socially responsible company conducts its business in an environmentally and socially acceptable way sole purpose test: A superannuation fund must be maintained for core purposes and some permitted ancillary purposes splitting agreement: An arrangement to split a superannuation account into two super benefits A couple can make a payment split or an interest split spouse: A spouse can be a married or de facto partner of the opposite sex, or former spouse Standard Choice Form: The form an employer must give to an employee informing the employee about her options under fund choice Super Co-contribution Scheme: The Federal Government makes matching super contributions on behalf of Australian employees who make voluntary contributions and earn less than $58,980 a year (for the 2007/2008 year) superannuation agreement: An agreement that outlines how the two parties to a marriage want their super to be carved up, if at all Any agreement about super can then become part of the broader property settlement Superannuation Co-contribution Scheme: See Super Co-contribution Scheme Superannuation Complaints Tribunal (SCT): An independent body established to investigate complaints about super funds that can’t be resolved by internal complaints processes superannuation contributions surcharge: An additional contribution tax on certain before-tax contributions made by those earning higher incomes Abolished in 2005, and now not applicable to any superannuation contributions made on or after July 2005 superannuation death benefit: Benefit payable from a superannuation fund upon a member’s death superannuation fund: A legal structure, known as a trust run by a trustee or trustee board Superannuation Guarantee (SG): The official term for compulsory superannuation contributions made by employers on behalf of their employees An employer must contribute the equivalent of per cent of an employee’s salary Superannuation Guarantee Charge (SGC): If an employer fails to pay Superannuation Guarantee by the due date, the employer has to pay the SGC, which is made up of the superannuation contribution owed, plus interest and an administration fee superannuation income stream: A series of regular payments from a superannuation fund superannuation income stream death benefit: An income stream payable from a super fund on a member’s death Superannuation Industry (Supervision) Act 1993 (SIS Act): The statutory bible for all superannuation funds superannuation lump sum: A lump sum payment received from a super fund superannuation lump sum death benefit: A lump sum payable from a member’s super account upon the member’s death SuperMatch: This product enables a super fund to search the Lost Members Register on a member’s behalf SuperSeeker: The online search facility of the Australian Taxation Office (www.ato.gov.au/super) that allows members to locate their lost super switching fees: A charge for swapping between investment options within a super fund taxable amount: Earnings on overseas super benefits while you’re an Australian resident taxable component: The taxable portion of a superannuation benefit An individual pays tax on this component if she receives a benefit under the age of 60 or receives an untaxed benefit taxable contributions: Employer contributions, including salary sacrifice contributions, are subject to contributions tax and, if a person is self-employed, any contributions for which an individual claims a tax deduction taxed benefit: The benefit is paid from a source where tax has been paid on the taxable contributions and earnings of the fund tax-effective: A term that means a person is able to take advantage of much lower rates of tax than he ordinarily pays on income taxed element: A person’s taxable component is usually a ‘taxed’ element, unless the person belongs to a public sector fund See untaxed benefit tax file number: A unique number issued by the Australian Taxation Office to identify individuals and organisations for tracking the payment of tax and to improve the efficiency of data collection tax-free component: The portion of the benefit that’s tax-free Ordinarily includes nonconcessional contributions and certain pre-July 2007 benefits tax offset: An offset that reduces the tax payable on taxable income TaxPack: The explanatory document that accompanies an individual income tax return term-allocated pension (TAP) (or annuity): The income stream is market-linked, which means no income guarantee is in place — income depends on how investments perform A TAP commenced before 20 September 2007 may also allow the recipient to receive more Age Pension term-certain pension (or term-certain annuity): A guaranteed income stream for a set period of time, between one year and 25 years Recipients can choose to receive a residual capital value term deposit: An arrangement where a person deposits a certain amount of money with a bank or financial institution for a set period of time and an agreed rate of interest testamentary trust: A trust that can control who gets a person’s super and other assets, while protecting the person’s estate from business creditors and wayward children, or as a means to look after children who can’t look after themselves today’s dollars: A term to indicate that a benefit amount has been adjusted for inflation to represent what the future benefit can buy today total and permanent disability insurance: An insurance product that pays the policyholder a lump sum or income stream if she becomes permanently disabled transition-to-retirement income stream (or plan or pension) (TRIP): A non-commutable income stream that’s available before retirement trust: The legal basis for the structure of a super fund, and that gives the trustee authority to invest money on behalf of members A trust is set up via a trust deed trust deed: A legal document that sets out the rules for running a super fund, and what the trustee can and can’t trust relationship: The trustee’s responsibility to members of a super fund trustee (or trustee board or trustee directors): This individual or organisation runs a super fund undeducted contributions: A term previously used to describe non-concessional contributions underfundus retirementus: A term that means not having enough money in retirement unfunded: Relates to unfunded public sector arrangements, which means the Government hasn’t coughed up the cash for super contributions unrestricted: See unrestricted benefit unrestricted benefit: This type of benefit isn’t subject to preservation and can be accessed at any time, subject to the rules of the super fund unrestricted non-preserved benefit: See unrestricted benefit untaxed benefit (or untaxed element): A benefit that hasn’t been subject to contributions tax or earnings tax The benefit is subject to a higher rate of tax than a taxed benefit voluntary contributions (or personal contributions): All contributions other than compulsory superannuation contributions Individuals under the age of 75 can make voluntary contributions to a complying superannuation fund warrant: The right to purchase a share or other asset at an agreed price at some time in the future wholesale master trust: See corporate master trust wholesale-style funds: A fund where members usually pay lower fees than in a retail superannuation fund wrap account (or wrap or wrap service or platform): An information collection service that bundles all of a person’s investments — direct shares, bank accounts, term deposits, managed funds A wrap service records all transactions, prices, brokerage, any GST, dividends paid, tax payable and other similar items ... ‘tasks for later’ basket Start today! Your biggest enemy in getting your superannuation working for you is procrastination About This Book Superannuation For Dummies, 2nd edition, caters for super... who lived a former life as a superannuation tech-head, and toyed with the idea of becoming a nomad She is the author of Superannuation For Dummies, Superannuation: Choosing a Fund For Dummies... superannuation editor of investment newsletter Eureka Report and one of the nation’s foremost authors on the complexities of our unique system of saving for retirement In Superannuation For Dummies,