Superannuation: the complete guide

• A. To provide a tax-free savings account for holiday expenses
• B. To help people save for retirement income through compulsory and voluntary contributions ✓
• C. To provide short-term loans to employees during emergencies
• D. To fund government healthcare programs directly

Why: Superannuation is a long-term savings system designed to build retirement income, funded mainly by employer contributions and personal savings that are preserved until retirement age.

• A. Pension levy
• B. Superannuation Guarantee ✓
• C. Retirement bonus
• D. Income surcharge

Why: The Superannuation Guarantee is the legal requirement for employers to pay a percentage of an employee's ordinary earnings into a super fund, in addition to their salary.

• A. At any age, once they have a job
• B. At age 50 regardless of employment status
• C. Once they reach their preservation age and meet a condition of release, such as retirement ✓
• D. Only after they turn 75

Why: Super is preserved until a person reaches their preservation age (between 55 and 60, depending on birth date) and meets a condition of release, such as retiring after that age.

• A. Selling insurance policies to members door-to-door
• B. Setting the income tax rate for members
• C. Acting in the best financial interests of fund members and managing the fund's assets ✓
• D. Choosing which employers must pay super

Why: Trustees have a legal duty to act in members' best interests, manage fund assets prudently, and comply with the rules set out in superannuation law.

• A. The employer's mandatory Superannuation Guarantee payment
• B. Government co-contribution from a low-income earner's personal after-tax contribution ✓
• C. Payroll tax deducted from wages
• D. Medicare levy paid to the Australian Taxation Office

Why: Personal contributions, including after-tax contributions that may attract a government co-contribution for eligible low-income earners, are voluntary, whereas employer SG payments are compulsory.

• A. Salary sacrifice
• B. Superannuation Guarantee ✓
• C. Co-contribution
• D. Concessional levy

Why: The Superannuation Guarantee (SG) is the legal requirement for employers to pay a set percentage of an employee's ordinary time earnings into a super fund, in addition to their wages.

• A. Non-concessional contributions
• B. Personal after-tax contributions
• C. Concessional contributions ✓
• D. Government co-contributions

Why: Concessional (before-tax) contributions are taxed at a lower rate within the fund, typically 15%, which is why they are called concessional.

• A. A contribution made by the government to low-income earners
• B. A contribution made from after-tax money that has no tax deducted in the fund ✓
• C. A contribution made by an employer above the SG rate
• D. A contribution that is automatically rolled over between funds

Why: Non-concessional contributions are made from money you have already paid income tax on, so they are not taxed again when they enter the super fund.

• A. The total balance you can hold in super
• B. The amount of before-tax contributions you can make each financial year at the lower tax rate ✓
• C. The age until which you can make contributions
• D. The amount your employer can pay in wages

Why: The concessional contributions cap sets the maximum amount of before-tax contributions that can be taxed at the concessional rate in a financial year. Contributions above it are generally taxed at your marginal rate.

• A. The employer's SG payment
• B. A salary sacrifice arrangement with the employer
• C. A personal contribution from after-tax income, which can be claimed as a tax deduction ✓
• D. A government age pension payment

Why: Personal contributions are made from your own after-tax money and can be claimed as a tax deduction if you meet the eligibility rules, effectively turning them into concessional contributions.

• A. Growth options hold a higher proportion of growth assets such as shares and property, while conservative options hold more cash and fixed interest ✓
• B. Growth options are guaranteed by the government, while conservative options are not
• C. Growth options charge no fees, while conservative options charge higher fees
• D. Growth options can only be accessed after retirement, while conservative options can be accessed at any time

Why: Growth options invest a larger share in growth assets like shares and property, which offer higher potential returns with more volatility. Conservative options hold more cash and fixed interest, offering lower volatility and typically lower long-term returns.

• A. An option that members must actively choose when joining a fund
• B. The investment option a fund automatically places a member's contributions into if they do not make a choice ✓
• C. An option that is only available to self-managed super fund members
• D. An option that guarantees a fixed annual return

Why: A default option is the investment strategy a super fund assigns to members who do not select an investment option themselves. It is typically a balanced or lifecycle-based option designed for the average member.

• A. Cash
• B. Fixed interest
• C. Australian and international shares ✓
• D. Term deposits

Why: Shares have historically delivered higher long-term returns than cash or fixed interest, but their prices can fluctuate significantly in the short term, making them the most volatile of the common asset classes.

• A. An option that stays fixed in the same asset mix for the entire life of the member
• B. An option that automatically reduces investment risk as the member gets closer to retirement age ✓
• C. An option that only invests in property throughout a member's working life
• D. An option that allows members to switch investments daily without any fees

Why: Lifecycle options adjust the asset mix over time, typically holding more growth assets when a member is young and gradually shifting toward more conservative assets as retirement approaches, to protect accumulated savings.

• A. It guarantees that every investment will make a profit
• B. It spreads risk across different asset classes so poor performance in one area may be offset by better performance in another ✓
• C. It removes all fees charged by the super fund
• D. It ensures the government will top up your balance

Why: Diversification reduces the impact of any single investment performing poorly by spreading money across various asset classes, sectors, and regions. It does not guarantee profits or eliminate risk entirely.

• A. Administration fee ✓
• B. Death benefit premium
• C. Exit fee
• D. Transfer fee

Why: Administration fees are commonly charged as a percentage of your account balance, often combined with a fixed dollar amount. Insurance premiums, exit fees and transfer fees are typically charged in different ways, such as a flat dollar amount or a one-off charge.

• A. A one-off charge paid when you first join the fund
• B. The cost of investing your money, including investment management expenses ✓
• C. A penalty for withdrawing money before retirement
• D. The premium paid for life insurance cover within super

Why: The investment management fee covers the cost of managing the fund's investments and is often expressed as a percentage of your balance. Joining charges, early withdrawal penalties and insurance premiums are separate items.

• A. Because all super funds charge exactly the same fees
• B. Because fees are only charged when you retire
• C. Because a low headline fee may be offset by high investment costs or insurance premiums, so total costs give a clearer picture
• D. Because the government sets a single fee for every fund

• A. The fund is always a poor choice because of its fees
• B. Fees are irrelevant to long-term performance
• C. The fund's returns after fees may still be competitive, so fees alone do not determine value
• D. The fund must be illegal under superannuation law

• A. Because fees are only deducted once at the start of your career
• B. Because fees are charged on the balance, so they compound and reduce the growth your savings could otherwise achieve over time
• C. Because fees are refunded in full when you retire
• D. Because fees only apply to members who make voluntary contributions

• A. Car and home contents insurance
• B. Life insurance, total and permanent disability (TPD) insurance, and income protection insurance ✓
• C. Travel insurance and pet insurance
• D. Professional indemnity and public liability insurance

Why: Superannuation funds typically offer life (death) cover, total and permanent disability (TPD) cover, and income protection cover. These are designed to protect members and their dependants against financial hardship arising from death, disability, or illness affecting the ability to work.

• A. To pay a lump sum when the member retires
• B. To provide a replacement of part of the member's income if they are unable to work due to illness or injury ✓
• C. To cover the cost of medical treatment not covered by Medicare
• D. To invest the member's savings in higher-return assets

Why: Income protection insurance pays a regular benefit, usually a percentage of pre-disability income (often around 70-75%), when a member is temporarily unable to work because of illness or injury. It helps maintain living standards during periods of incapacity.

• A. Insurance that the member must actively apply for and medically underwrite
• B. Insurance automatically provided to members who have not opted out, usually funded from super contributions ✓
• C. Insurance that is only available to members aged over 65
• D. Insurance that is paid for entirely by the employee from after-tax salary

Why: Default cover is automatically included in many super funds for eligible members unless they choose to opt out. It is typically paid for by deducting premiums from the member's super account balance, which reduces retirement savings over time.

• A. Premiums are always lower than any private policy
• B. Premiums are generally paid from super balances, which can make cover more affordable and avoid cash-flow strain ✓
• C. Benefits are paid tax-free in all circumstances regardless of the member's age
• D. Members can never lose their cover once it is established

Why: Because premiums are usually deducted from the super account, members may find cover more affordable and avoid paying from their take-home pay. However, super-held insurance can have trade-offs, such as reducing retirement savings and potentially offering less flexible terms than standalone policies.

• A. Cover is automatically increased to the maximum level
• B. Cover may be cancelled under the 'inactive account' rules, typically after 16 months with no contributions ✓
• C. Cover becomes permanent and cannot be cancelled
• D. The fund is required to pay the member's premiums from the government

Why: Under Australian superannuation rules, if a member's account has been inactive (no contributions received) for 16 consecutive months, the trustee may cancel insurance cover on that account. Members should check their cover regularly, especially if changing jobs, to avoid unintentionally losing protection.

• A. 55
• B. 60 ✓
• C. 65
• D. 67

Why: For people born after 1 July 1964, the preservation age is 60. Once you reach your preservation age and retire, or reach age 65 regardless of work status, you can generally access your super. Preservation age is lower for those born earlier.

• A. Vested benefits
• B. Preserved benefits ✓
• C. Concessional contributions
• D. Rollover funds

Why: Preserved benefits are super amounts that are locked away until a condition of release is met. Most super is preserved until retirement after reaching preservation age, which helps ensure money is available for retirement income.

• A. A lump sum payment only
• B. A regular income stream, such as an account-based pension ✓
• C. Automatic transfer to the Australian Taxation Office
• D. Only through a government age pension

Why: Members can usually take their super as a lump sum, as a regular income stream such as an account-based pension, or a combination of both. Income streams provide ongoing payments during retirement, while lump sums give a one-off amount.

• A. Compassionate release
• B. Financial hardship release ✓
• C. Early retirement release
• D. Transition to retirement release

Why: Financial hardship release allows eligible people who have received certain government benefits for 26 weeks and cannot meet immediate living expenses to access a limited amount of super. It is a restricted condition of release, with strict eligibility criteria.

• A. There is no limit
• B. $500,000
• C. $1.9 million ✓
• D. $3 million

Why: The transfer balance cap limits how much super can be moved into the tax-concessional retirement phase. It was $1.9 million from 1 July 2021 and later increased to $2 million from 1 July 2023, so $1.9 million reflects the cap at that point in the course. Amounts above the cap must remain in accumulation phase or be withdrawn.

• A. To provide a tax-free savings account for short-term purchases
• B. To accumulate savings over a person's working life to fund retirement ✓
• C. To serve as a government loan scheme for first home buyers
• D. To provide health insurance cover for retirees

Why: Superannuation is a compulsory long-term savings system designed to build retirement income by accumulating contributions and investment earnings throughout a person's working life.

• A. 6%
• B. 9.5% ✓
• C. 12%
• D. 15%

Why: The Superannuation Guarantee rate has been 11.5% since 1 July 2024 and 11% previously, but the 9.5% rate applied for the 2021-22 to 2023-24 period. Note: confirm the current rate with the ATO, as it changes over time.

• A. 55
• B. 58
• C. 60 ✓
• D. 65

Why: The preservation age is the age at which you can access your super. For people born after 1 July 1964 it is 60, meaning you generally cannot access your super before this age, even if you are no longer working.

• A. Contributions made from after-tax income that are not deductible
• B. Contributions made from before-tax income, taxed at a lower rate within the fund ✓
• C. Government co-payments made to low-income earners
• D. Withdrawals made in cases of financial hardship

Why: Concessional (before-tax) contributions, such as employer SG payments and salary sacrifice, are taxed within the super fund at a concessional rate, typically 15%, which is usually lower than your marginal income tax rate.

• A. A self-managed super fund (SMSF) with a complex investment strategy
• B. A low-cost industry or retail fund with a sensible default investment option ✓
• C. Multiple small super accounts held simultaneously
• D. A fund that charges high exit fees and performance fees

Why: Low-cost industry or retail funds reduce fees that erode retirement savings over time, and a default investment option often suits people without the time or expertise to manage investments actively. Holding multiple accounts can lead to duplicate fees and insurance premiums.