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Types of Superannuation Funds
The two main types of superannuation funds
The following table shows the differences in treatment of contributions and benefits between the two main types of superannuation funds.
Accumulation or defined contribution
Defined for employers and employees such as a percentage of salary
Lump sum - Amount depends on performance of fund and amount of contributions.
Employee's contributions defined.
Employers contribute whatever additional amounts are needed to meet fund's obligations to its beneficiaries.
Amount is usually based on final salary or average final salary (often the last 3 years) x a multiple. The multiple itself is usually a combination of length of membership and a percentage of final salary for each year of service.
Examples of superannuation schemes
The various types of employer sponsored and personal superannuation schemes include:
- Public sector funds established for Australian and state government employees,
- Corporate funds established by medium to large private sector companies for their employees,
- Industry, or multi employer, funds for paying employer contributions to superannuation for employees covered by particular awards,
- Self-managed superannuation funds (SMSF) and small APRA funds, More
- ATO Small Superannuation Accounts, designed for employer contributions which any other superannuation fund will not accept,
- Retirement savings accounts offered by banks,
- Retail funds or public offer funds, covering superannuation funds available to the general public, including employers and the self employed.
Description of Self Managed Superannuation Funds and Small APRA Funds
A superannuation fund is defined in the VEA as being:
- a fund that is or has been a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993 in relation to any tax year; or
- an Australian superannuation fund (within the meaning of the Income Tax Assessment Act 1997) that is not a complying superannuation fund mentioned in paragraph (a) in relation to any tax year; or
- a scheme for the payment of benefits upon retirement or death that is constituted by or under a law of the Commonwealth or of a State or Territory; or
- an RSA within the meaning of the Retirement Savings Accounts Act 1997; or
- any of the following funds (unless the fund is a foreign superannuation fund):
- a fund to which paragraph 23(jaa), or section 23FC, 121CC or 121DAB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 2) 1989) has applied in relation to any tax year;
- a fund to which paragraph 23(ja), or section 23F or 23FB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of paragraph (a) of the definition of superannuation fund in former subsection 27A(1) of the Income Tax Assessment Act 1936) has applied in relation to the tax year that started on 1 July 1985 or an earlier tax year;
- a fund to which section 79 of the Income Tax Assessment Act 1936 (as in force at any time before 25 June 1984) has applied in relation to the tax year that started on 1 July 1983 or an earlier tax year.
An employee is someone who is:
- under a contract of service to an employer, and
- a salary or wage earner, and
- subject to PAYE tax deductions.
This is a fund with less than five members that does not meet the criteria for an SMSF. The trustee of an SAF must be a corporate trustee approved by APRA. The trustee may receive remuneration for acting as trustee.
An ATO small superannuation account is an account kept in the name of an individual under the Small Superannuation Accounts Act 1995.