Skip to main content

How does super work?

Find out how super funds work and the factors that impact your super balance.
Published 17 Apr 2023   |   3 min read

Your super account is a place to save and invest money while you are working so you have enough retirement savings to live on when it's time.

Your employer will pay a percentage of your salary to your super as a contribution, and your superannuation fund will invest this money on your behalf. It is the super fund’s job to help you build a healthy sum to retire with.

If you’re self-employed, you can choose to pay yourself super.

How does your super balance grow?

While you’re working, your super grows by:

  • Compulsory contributions from your employer – known as the Superannuation Guarantee, your employer must pay 10.5% of your salary to your super fund, at least every quarter.*

  • You can choose to make additional, voluntary contributions to your super.

  • Positive investment returns – the money made from the investments in your super fund, which is reinvested and can compound over time.

  • Rollovers from other super funds if you decide to consolidate your super

  • Government contributions for those eligible

The aim is for returns to compound over time, as they are reinvested back into assets. The longer you are with a fund that performs well, the more your super balance will grow.

How do personal contributions work?

In addition to what your employer pays in employer contributions, you can also make your own contributions to your super fund too.

Voluntary contributions (after-tax income) allow you to add more money to your own super fund from your take-home income, up to a cap. This is known as non-concessional contributions.

This isn't the only way to grow your super contributions. There are also salary sacrifice and spouse contributions.

Salary sacrifice contributions (which are concessional contributions, just like the Super Guarantee contributions that your employer pays) are where you ask your employer to pay more of your before-tax income into your existing super account. Spouse contributions allow a higher-earning partner to top up your super contributions, allowing them to claim an 18% tax deduction on up to $3,000 through their tax return.

You can find out more about the types of contributions and how they are taxed via the Australian Taxation Office (ATO).

The aim is for returns to compound over time, as they are reinvested back into assets. The longer you are with a fund that performs well, the more your super balance will grow.

What reduces your super balance?

  • Super contributions tax that’s paid when money goes into your super account

  • Tax paid on your super’s earnings

  • Your super fund’s fees

  • Insurance fees (if you have insurance in your super)

  • Negative investment returns – if your investments perform poorly, your super balance will decline.

When can you access your super?

When you can access your super depends on your preservation age, but is typically 60 for most people if they have permanently retired. You may be able to access your super early in certain financial circumstances (like severe financial hardship) but you'll have to meet strict conditions. You can find out more about the conditions of release for you to access your super via the ATO.

You can either withdraw your super savings as a regular income in retirement, or you can choose to take out a lump sum.

Consider the right investment options for you

The money in your super account is invested in various options ranging from “conservative” to “growth”. If you don’t select an investment option when you join a super fund, you'll usually be invested with their default investment option. You should still have the ability to choose which investment options you’d like your super contributions invested in after you join.

It’s important that you consider your age, values, and investment risk tolerance when you compare super funds. Generally, higher growth comes with higher risk.

For example, younger people may decide to focus on growth options as they have many years ahead before retirement. Those closer to retirement may prefer lower-risk options to protect their super balance.

The aim is for investment earnings to compound over time, as they are reinvested back into assets. The longer you are with a fund that performs well, the more your super balance will grow.

This information is general in nature and provided for informational purposes only. It is not intended to be used as investment or financial advice and does not take into account your personal financial situation, objectives or needs. You should consider obtaining financial advice that is tailored to suit your personal circumstances before making an investment decision or switching your super. Please read the Financial Services Guide and the relevant Product Disclosure Statement(s) and Target Market Determination as well as other important documentation available on our website for information about our products.

*This is set to increase to 12% by 2025.


Australian Ethical acknowledges the Traditional Owners of the country on which we work, the Gadigal people of the Eora Nation, and recognise and celebrate their continuing connection to land, waters and culture. We pay our respects to Elders past and present and thank them for protecting Country since time immemorial.

See our Reconciliation Action Plan