Superannuation is Australia’s retirement savings system. It is widely recognized to be one of the best retirement savings systems in the world and it currently holds A$1.3 trillion worth of assets.

There are 5 main types of Superannuation Funds:

  • Self Managed Super Funds (SMSF)
  • Retail Funds
  • Industry Funds
  • Public Sector Funds
  • Corporate Funds

The graph below shows the share of superannuation assets that each fund holds:


As illustrated by the graph above SMSF’s have been the fastest growing fund type and there are now more assets in SMSFs than in any other type of superannuation fund.

The popularity of SMSFs can be attributed to a number of factors:

  • Investment choice and control: SMSFs can invest in almost any type of asset including commercial and residential property, listed shares, bonds, exchange traded funds (ETFs), artworks etc. Other types of superannuation funds are generally limited to managed investment schemes run through unit trusts.
  • personalised tax management capabilities
  • estate planning advantages
  • pooling of assets with up to 4 members
  • cost benefits
  • increased contribution and withdrawal flexibility
  • greater choice of life insurance providers.

Self Managed Super Funds (SMSFs)

  • Each fund can have between 1 and 4 members allowing for asset pooling.
  • The members of the fund are also the trustees of the fund either directly or as directors of a corporate trustee. Members therefore make their own investment decisions.
  • SMSFs have almost unlimited investment choice including being the only fund that can own direct property e.g. an office or a house. SMSFs cannot purchase assets from related parties except for commercial property and listed securities.
  • SMSFs are governed by the Australian Tax Office (ATO) and have to lodge an annual return which must be audited.

Retail Funds

  • Each fund has only 1 member.
  • Investment choice generally limited to risk profiled and sector specific managed investment schemes operating as unit trusts. There are a large number of unit trusts to choose from and certain retail funds known as “wrap funds” even allow for direct ownership of listed ASX shares.
  • The trustees are generally large life companies or bank subsidiaries.
  • Regulated by the Australian Prudential Regulation Authority (APRA)

Industry Funds

  • Created by trade unions in the 1980’s for workers in specific industries but are now open to anyone. Similar to Retail Funds with each fund having 1 member.
  • Investment choice generally limited to risk profiled and sector specific managed investment schemes operating as unit trusts. There are fewer unit trust investments to choose from than Retail Funds however they typically have lower fees than retail funds.
  • The trustees are usually boards comprising trade unions and employer associations
  • Regulated by the Australian Prudential Regulation Authority (APRA)

Public Sector Funds

  • In the past these were limited to government employees and unlike all the funds above which are Defined Contribution Schemes, these funds were Defined Benefit Schemes.
  • The Defined Benefit Schemes are now closed to new members due to their massive cost to the government.
  • Public sector funds are now Defined Contribution Funds and effectively just the same as Industry Funds

Corporate Funds

  • Limited to employees of a particular company
  • Usually very similar to Retail Funds however certain companies may have Defined Benefit Schemes but these are often closed to new members.

Key Superannuation Features

  • Employers are legally obligated to contribute 9.25% of an employee’s wage to superannuation based on super guarantee legislation.
  • Funds are preserved (cannot be withdrawn) until retirement at age 55 or 60 depending on your date of birth. From age 65 all funds are accessible even if you are still working.
  • There is no obligation to withdraw the funds on retirement or reaching age 65. There is also no requirement to commute the fund into an annuity and the whole fund can be withdrawn as a lump sum if you so choose.
  • All withdrawals are tax free after age 60 and concessionary taxed between the ages of 55 and 59.
  • Concessional (tax deductible) contribution limits are $25,000 p.a. or A$35,000 p.a. if aged 59 or over on 30 June 2013.
  • Non-concessional contribution limits are $150,000 per year or $450,000 p.a. bringing forward the following 2 years contribution limits.
  • Fund earnings are taxed between 0 and 15%
  • The dividend imputation system can result in substantial tax refunds within a superannuation fund.
  • Life insurance can be held inside a superannuation fund and the fund can claim a deduction for the premiums.

For advice on superannuation, please click here.