If you’ve ever wondered where your super actually goes, you’re not alone. Super can look like a single line on a payslip, but behind it is a regulated system designed to fund retirement. Understanding superannuation how it works helps you make better decisions about fees, insurance, investment risk and when you can access your money.
This article is a practical overview—useful for employees, contractors and business owners who want to reduce surprises later.
The core idea: compulsory contributions plus long-term investing
Superannuation is money set aside for retirement, generally made up of contributions and investment earnings. For employees, employers must make Superannuation Guarantee (SG) contributions based on Ordinary Time Earnings (OTE). The SG rate is published each year by the Australian Taxation Office (see ATO: Super guarantee rate).
Those contributions go into a super fund, which invests across assets like shares, property and fixed interest. Over time, compounding is the main engine of growth—small differences in fees, returns and contribution timing can add up over decades.
What happens each payday (and why “payday super” matters)
Most payroll systems send contributions to a super fund electronically using SuperStream. The contribution is credited to your account, then pooled and invested according to the option you’ve chosen (or the fund’s default).
Timing is becoming more important. From 1 July 2026, the “Payday Super” reforms are intended to align super payments with wage payments, rather than quarterly cycles (see ATO: Payday superannuation). This should mean earlier contributions and clearer visibility if something is missed.
For employers, it raises the standard for payroll accuracy. For employees, it’s a reason to check statements more often, not just at tax time.
Your super account: balance, fees, and the insurance you may not notice
A super account has three moving parts:
- Contributions: employer SG, plus any personal contributions you add.
- Investment earnings (or losses): driven by your chosen investment option and market movements.
- Fees and insurance premiums: deducted from your balance.
Fees are not “bad”, but they are real. Most funds charge an administration fee and an investment fee. Insurance is often provided by default (commonly life and total & permanent disability cover), but the design differs across funds. ASIC’s MoneySmart has a clear overview of super fund types and what they typically include (see MoneySmart: Types of super funds).
A useful habit is to review your annual statement for: total fees, insurance premiums, and whether your investment option still matches your time horizon.
Choice of fund and consolidating accounts
Many Australians end up with multiple super accounts after changing jobs. Multiple accounts can mean multiple sets of fees and duplicated insurance premiums. Consolidating can reduce costs, but you should check whether you’ll lose valuable insurance or specific fund features.
You can often consolidate online by linking myGov to the ATO and using the “transfer super” function (see ATO: Transferring or consolidating your super and MoneySmart: Consolidating super funds). If you have an SMSF (self-managed super fund), rollovers have additional steps and timing rules, so get help early if you’re unsure.
When can you access it: preservation age and “conditions of release”
Super is generally preserved until you meet a condition of release. Two common triggers are reaching preservation age and retiring, or turning 65. Preservation age depends on your date of birth (see ATO: Payments from super – preservation age table).
ASIC’s MoneySmart also explains the practical “when can I get it?” question in plain English, including retirement and limited early access pathways. The important takeaway is that super is not a general savings account—you can’t simply withdraw it to fund lifestyle spending without meeting the legal tests.
What changes if you manage it yourself (SMSF vs retail/industry fund)
A self-managed super fund (SMSF) is a private super fund where members are trustees (or directors of a corporate trustee). SMSFs can provide control and flexibility, but they also bring trustee duties, record-keeping, audits, and penalties if rules are broken.
If you’re considering that path, start with an honest “fit” test: time, governance discipline, willingness to document decisions, and comfort with compliance. You can read our plain-English overview in What is a Self Managed Super Fund? and the practical setup sequence in Set Up a Self-Managed Super Fund (SMSF): Step-by-Step.
A simple “super health check” you can do this month
To turn superannuation how it works into action, pick one small check:
- Confirm your employer is paying SG and the rate looks right
- Review your investment option (growth vs balanced vs conservative)
- Check fees and insurance premiums against your balance
- Consider consolidating duplicate accounts (after checking insurance)
- Set a calendar reminder to review your statement each year
Super is long-term by design. The goal isn’t to constantly tinker—it’s to make a few high-quality decisions that prevent avoidable leakage from fees, lost insurance value, or missed contributions. TTS & Associates is well versed in superannuation and can help with your particular needs.
