How much do you know about Australian superannuation and taxation?
According to Canstar, 40% of Australians do not know how much money they have in their super. It stands to reason that those 40% also do not know much about superannuation laws or taxation.
On top of a lack of awareness about superannuation balances, only 67% of Australians who have super with life and disability insurance included knew that they had these insurance policies. Not knowing about your insurance policies and fees is one of the four most common superannuation errors.
Take the quiz to test your superannuation and taxation knowledge. The answers are below the quiz (no cheating).
A. How much superannuation must employers pay to their employees as a percentage of their wages?
B. How are super withdrawals taxed?
- At a flat rate of 32.5%
- It depends on whether you withdraw your super as a lump sum or as an income stream
- Super withdrawals are never taxed
- At a flat rate of 15%
C. Why should you put all your superannuation money into one account?
- You will only pay one set of fees and it will save you money by not paying the fees of multiple funds
- If you put all your money into one superannuation account, your super balance will grow faster due to compound interest
- You only get letters and emails from one superannuation fund so it’s less confusing
- All of the above
D. Making extra payments voluntarily to your superannuation fund from your take home (after-tax) pay is:
- Taxed at 15% in your super fund
- Not taxed in your super fund
- Not allowed under Australian superannuation law
- Only allowed for people in the First Home Super Saver Scheme (FHSSS)
E. What scenarios allow you to get your superannuation money out?
- The First Home Super Saver Scheme
- Covid-19 Early Release of Super
- Severe Financial Hardship
- After you reach your retirement age
- All of the above
F. Which services do your taxes pay for?
- Australia’s Defence Force
- Roads and Railways
- All of the above
G. What is a capital gain?
- When you sell an asset for more than what it cost to buy and it attracts capital gains tax
- When you buy an asset for more than the person who sold it to you paid for it and it attracts capital gains tax
- When you inherit money
- All of the above
H. What is the tax free threshold?
- When you buy an item that has no tax
- The first $18,200 of your yearly income
- The first $10,800 of your yearly income
- None of the above
I. What does it mean that Australia has a progressive taxation system?
- People who earn more pay a higher rate of tax
- As you get progressively older you pay more tax
- The tax rate you pay is the same regardless of the level of your income
- People who earn more money pay less tax
J. Where does Australian Federal Budget get most of its money?
- Sales taxes such as the Goods and Services Tax
- Company tax
- Individual income tax
- Capital Gains Tax
- Fines and Fees
K. What important change to superannuation came in on 1 July 2019?
- When you lose job, you also immediately lose your life and disability insurance
- Your life and disability insurance will continue indefinitely as long as you have money in your super fund to pay for it
- After 6 months of no contributions being made to your super fund, your life and disability insurance ceases
- After 16 months of no contributions being made to your super fund, your life and disability insurance stops
A – 3: Your employer must put a minimum of 9.5% of your ordinary earnings into a superannuation fund for you. This money is in addition to your wages and is called the Superannuation Guarantee.
B – 2: This is a complex answer with many scenarios. Go to How Tax Applies To Your Super to find out more.
C – 4: It’s best to have only one superannuation fund as it means you are being charged once for fund management fees and insurance fees. Multiple funds means multiple fees and extra emails and letters.
D – 2: If you make extra payments into your super from your wages after you’ve already been taxed, that money won’t be taxed again. However, if your super top up is made from your wages before you are taxed then you’ll be taxed at 15% rather than your usual taxation rate.
E – 5: There are eight reasons why you can access an early release of your super. These reasons are the Covid-19 early release scheme, severe financial hardship, terminal illness, temporary incapacity, permanent incapacity, your super balance is less than $200, or the First Home Super Saver Scheme. The ATO’s webpage Early Access To Your Super explains the hows and whys.
F – 6: Money paid as taxation pays for the government services of health, education, defence, roads and railways, and Centrelink. More information can be found at Tax in Australia: What You Need To Know.
G – 1: When you make a profit on something such as property or shares you will likely have to pay tax to the government on the profit you made. This is called a capital gains tax or CGT.
H – 2: As an Australian resident, the first $18,200 is not taxed.
I – 1: Australia has a progressive taxation system. This means that the more money you earn, the more tax you pay.
J – 3: The majority of money that funds the Australian Federal Budget comes from individual income tax. That’s the tax paid on money that you earn.
K – 4: Inactive super accounts that haven’t had any contributions or actions in the past 16 months will have their insurance policies cancelled.
How did you go on the quiz?
Please share your comments or thoughts in the comments box below.
If you enjoyed this quiz, try the Financial Personality Quiz: Spender or Saver.