The main purpose of this assessment is to focus on the Superannuation fund for the employees. The superannuation is evaluated in context of Australian market. In relation to this, the superannuation assessment is carried out in depth manner as its background information, contributor and taxation aspects including the superannuation provider in the Australian market. On the other hand, the superannuation products by the selected three providers are analyzed with respect of having the assets as stocks, bonds and financial assets. Along with this, the risks related to the products of superannuation providers are also elaborated with its performance over a time period. Mean, standard deviation, minimum and maximum is determined in relation to the superannuation with the graphical presentation. The superannuation calculation is also made with given illustrations.
Superannuation can be termed as the organizational pension that is saved by the employee while working in the organization for future benefits. The superannuation money is deposited in an account by the employee so that the employee might not face the financial problem after retirement from service. In the Australian nation, superannuation is compulsory by the employee or employee which helps to provide realistic income at the time of retirement. On the other hand, the money which is deposited in the superannuation fund, it cannot be withdrawal until the retirement (ATO, 2017). The superannuation account cannot be accessed before the age of retirement as promoters may offer the early access but the employees may access the super fund before the retirement due to the buying a house, car and paying off debts. As these schemes are totally illegal but in the emergency case, heavy penalties are applicable if an employee engage to withdraw. After the starting work with employer, employer needs to give a standard choice to the employees in the time duration of 28 days for the eligible employees. On the other hand, if any employee is temporary residents of Australia and leaving the Australia then he or she is eligible to for early super and this type of payment is called Departing Australia Super Payment. In this situation, citizens of New Zealand and permanent residents of Australia are not able to access the departing Australia super payment.
In the superannuation account, the employer and employee both pay the money into the superannuation fund to contribute towards the strengthening of employee’s financial position at the time of retirement. The super guarantee rate in the Australia is 9.5% and it will grow by 12% up to the year 2025. It is the statutory mandatory for the employer to provide the support employee through superannuation fund. The major retirement benefits are as gratuity, pension system and provident fund. The superannuation fund cannot be withdrawal before the age of retirement and after this, it can be opt out as on third of its fund for one time and rest two third is provided to employee as pension scheme. For having the superannuation account, employee below the age of 18 years are required to work for 30 hours in a week and then he or she can proceed with the superannuation fund (ATO, 2017). In the Australian market, employers need to pay the super from the time when the employee get started work with the employers. Along with this, the employers need to pay the super fund into the account of employees at least four times in a year which is as
At this time, employer may also pay the fund on behalf of employee as post- super contribution but the amount of superannuation is should be paid promptly. The employer needs to pay at quarter basis as super guarantee by 9.5% of ordinary time earnings for employees.
The superannuation fund is levied under the taxable income as the taxable income of super fund is calculated as accessible income less allowable dedications. The accessible income is included as the taxable income which is as concessional, net investment received, contributions gain and discounted capital gains. On the other hand, undetectable income and exempt income is not included into the contributions. The assessable income as investment income of super fund is subjected to pay tax with the effective rate of 15%. On the other hand, allowable dedications such as investment management expenses, insurance premium and administration expenses are might not be taxable. There are two types of contributions such as concessional and non- concessional in which taxable income exceeds the limit of $30,000 is subjected to pay the tax with flat rate of 30% (Canstar, 2018). Apart from this, if the employee is eligible for assessing the super fund, employee can take out the lump sum money or the fund can also be getting as regular income. The employer at the age of 60 years, the withdrawal of super fund is tax free. But the untaxed fund as government super fund is applicable to pay the tax with the different rates. In addition to this, the employee can reduce the tax through contributing money into the 401k retirement plan and second one is to reduce the income which is not understood fair to adjust income.
In the Australian market, there are several superannuation providers in the Australia which operates the fund under the rules and regulations of Australian Taxation Office. In Australia, there are about 500 superannuation providers and the total assets under the super fund is recorded $2.05 trillion at the quarter end of March 2015 (CCH, 2013). Along with this, there are seven major superannuation funds in Australia such as self managed superannuation fund, industry fund, retail masters trust, employer stand- alone fund, public sector employee fund and small APRA fund.
In order to carry out the assessment, the three Australian superannuation providers are chosen as
Australian super: The Australian super fund is one of the largest industries which are a superannuation and pension fund. The Australian super is headed by the Australian council of trade unions (ACTU) and Australian industry group. The company is having 1 out of 10 workers is the customer of Australian super. On the other hand, Australian super had crossed the investment by $120 billion in the year 2017 (AustralianSuper, 2018).
Commonwealth bank approved deposit fund: The Commonwealth bank approved deposit fund is also proving the superannuation fund service to the employees. The fund amount is recorded as $8000. The Commonwealth is managed by CMLA (Commbank, 2018). The Commonwealth bank has the 54% of male and 46% are women members for the management of super fund.
Legal super: The legal super is one of the largest superannuation industries to provide the service to legal community of Australia. It also provides the opportunity for having wide range of investment options with best practices(Canstart, 2018).
The superannuation companies are offering the wide range of products to the employees so that the employee can get the good amount of money while retiring from the job. The superannuation providing companies are intended to provide the good benefits to its people so that the financial needs of people can be fulfilled at the time of retirement and they can also survive easily with the pension plan of super fund. In relation to the superannuation fund, three superannuation provider companies are analyzed with respect to its products. The three companies are as Australian super; Commonwealth bank approved deposit fund and Legal super.
In context to this, the Legal super engaged into the management of super fund of employees through absorbing the best possible solution as it providing the superannuation fund management by online share trading, international share trading, fund management, ETFs and crypto currency wallet. On the other hand, this entity is also focused on providing loans, account and transfer, credit card products and the insurance for health, car and travel insurance (Canstar, 2018). On the other hand, Australian super business also deals in different products of investment as premixed, DIY mixed and account based pension and age based pension. Moreover, the Commonwealth bank approved deposit fund entity is also engaged into the several investment options such as share trading, term deposit, managed fund, property investment, and self managed super fund and investment growth bond. As per the review of investment products of superannuation provider, it is identified that the companies are dealing in stock and bonds as well. On the other hand, apart from the bond and stock, other financial management options are available with the superannuation business.
As Australian super provide the investment options as premixed option in which it diversified the fund to reduce the risk as it provide the different options for investing so the return can be gain in positive manner. The major options are as balanced, high growth, socially aware, indexed diversified, conservative balanced and stable. In the balanced options, 90% of total member are interested to employ the fund in this and the 5 years performance is recorded as 10.51% and 11.08% in financial year 2018. The second investment option is DIY mix in which, the Australian super offer the options such as Australian shares, international shares, property, diversified fixed interest and cash (AustralianSuper, 2018). The member direct investment options provide the opportunity for employing the super fund into shares, exchange traded fund and term deposit.
Further, the three investment options for legal super are as online share trading, crypto currency and ETFs. The online share trading provides the opportunities to invest the super fund for buying and selling the shares for listed companies. On the other hand, the crypto currency investment option provides the fiat and crypto currency on each exchange in US dollar and Aussie. The major crypto currencies are as bit coin, ethereum or ripple. Along with this, the exchange traded fund offers the basket of investment options in a single trading.
The Commonwealth bank deposit fund Australia is also dealing in the share trading, where the client provide the broker service through its Commence (Commbank, 2018). In addition to this, term deposit is also an investment option which delivers the deposit management with the competitive interest rates as short of 1 month to 5 years. The third option for the investment is as investment growth bond.
As per the selected products for the super fund management, the risks are subjected to the market and the investment option fluctuation.
|
Name of Superannuation provider |
Investment options |
||
|
Type of risk |
High |
Medium |
Low |
|
Australian super products |
Short time |
Medium term |
Long term |
|
Premixed |
Short term (High risk) |
Medium risk |
Low to medium risk |
|
DIY mixed |
High risk |
Medium risk |
Low to medium risk |
|
Member direct |
Short term (Very high risk) |
Medium to high risk |
Long term medium risk |
|
Legal super |
|||
|
Online share trading |
High risk for short term |
Medium to high risk |
Medium risk for long term |
|
Crypto currency exchanges and wallets |
High risky |
High risky and speculative |
High risky and complex |
|
Exchange Traded Funds (ETFs) |
High risk due to market risk |
High risk of currency risk |
High risk |
|
Commonwealth bank super deposit |
|||
|
Share trading |
Very high risk |
High risk |
High risk |
|
Term deposit |
High to medium risk |
Medium risk |
Low to medium risk |
|
Investment growth bond |
High risk (Higher return) |
High risk |
High risk |
Over the research, the performance of 9 investment products is determined with the latest report in the market with the ratings.
The Legal super managed the fund in effective manner so the online share trading activity is rating as
Australian super’s investment option performance
|
Performance of Investment Options |
|||
|
9 investment options |
One year |
Three year |
Five year |
|
Online share trading |
1.2 |
2.27 |
3.5 |
|
Crypto currency performance |
0.39 |
1.92 |
0.58 |
|
Exchange Traded Funds |
1.37 |
12.2 |
8.64 |
|
Premix options |
11.08 |
12.43 |
5.99 |
|
DIY Mix |
13.66 |
14.28 |
7.45 |
|
Share market |
1.08 |
3.24 |
2.83 |
|
Term deposit |
13 |
9 |
10 |
|
Investment growth bond |
0.97 |
1 |
1.09 |
From the performance of 9 investment options of three superannuation provider in the Australian market, the investment products are performing as per the market risk and risk appetite is also differentiated over the different products. From the above analysis of depicted graph, it can be stated that DIY mix investment is performing well as the line graph indicating that the performance is sound for the comparison of 1 year, 3 year and 5 years. Along with this, the term deposit is also performing better from five year performance (Australiansuper, 2018). On the other hand, it can also be reported that the crypto currency is one of the worst performer over the selected 9 investment products. Moreover, it is also analyzed that investment growth bond performance is also not average as for 1 year, 3 years and 5 years.
On the basis of above determined data from the previous year, the mean, and standard deviation is determined as below
|
Performance of Investment Options |
|||||||
|
9 Investment Options |
One year |
Three year |
Five year |
Mean |
Standard deviation |
Minimum |
maximum |
|
Online share trading |
1.2 |
2.27 |
3.5 |
2.323 |
1.151 |
1.2 |
3.5 |
|
Crypto currency performance |
0.39 |
1.92 |
0.58 |
0.963 |
0.834 |
0.39 |
1.92 |
|
Exchange Traded Funds |
1.37 |
12.2 |
8.64 |
7.403 |
5.520 |
1.37 |
12.2 |
|
Premix options |
11.08 |
12.43 |
5.99 |
9.833 |
3.396 |
5.99 |
12.43 |
|
DIY Mix |
13.66 |
14.28 |
7.45 |
11.797 |
3.777 |
7.45 |
14.28 |
|
Share market |
1.08 |
3.24 |
2.83 |
2.383 |
1.147 |
1.08 |
3.24 |
|
Term deposit |
13 |
9 |
10 |
10.667 |
2.082 |
9 |
13 |
|
Investment growth bond |
0.97 |
1 |
1.09 |
1.020 |
0.062 |
0.97 |
1.09 |
Over the reporting of mean, it is analyzed that the crypto currency determined the lower mean difference. Along with this, the DIY mix is identified with the highest mean. On the other hand, DIY mix is also indicating the higher standard deviation and crypto currency is having low standard deviation.
|
Birthday |
Annual salary Increment by 3% ($) |
|
25th |
60000.0 |
|
26th |
61800.0 |
|
27th |
63654.0 |
|
28th |
65563.6 |
|
29th |
67530.5 |
|
30th |
69556.4 |
|
31st |
71643.1 |
|
32nd |
73792.4 |
|
33rd |
76006.2 |
|
34th |
78286.4 |
|
35th |
80635.0 |
|
36th |
83054.0 |
|
37th |
85545.7 |
|
38th |
88112.0 |
|
39th |
90755.4 |
|
40th |
93478.0 |
|
41st |
96282.4 |
|
42nd |
99170.9 |
|
43rd |
102146.0 |
|
44th |
105210.4 |
|
45th |
108366.7 |
|
46th |
111617.7 |
|
47th |
114966.2 |
|
48th |
118415.2 |
|
49th |
121967.6 |
|
50th |
125626.7 |
|
51st |
129395.5 |
|
52nd |
133277.3 |
|
53rd |
137275.7 |
|
54th |
141393.9 |
|
55th |
145635.7 |
|
56th |
150004.8 |
|
57th |
154505.0 |
|
58th |
159140.1 |
|
59th |
163914.3 |
|
60th |
168831.7 |
|
61st |
173896.7 |
|
62nd |
179113.6 |
|
63rd |
184487.0 |
|
64th |
190021.6 |
|
65th |
195722.3 |
(b) Determination of annual superannuation contribution
|
Annual salary Increment by 3 %($) |
Contribution each year by 9.5% |
|
60000.0 |
5700.0 |
|
61800.0 |
5871.0 |
|
63654.0 |
6047.1 |
|
65563.6 |
6228.5 |
|
67530.5 |
6415.4 |
|
69556.4 |
6607.9 |
|
71643.1 |
6806.1 |
|
73792.4 |
7010.3 |
|
76006.2 |
7220.6 |
|
78286.4 |
7437.2 |
|
80635.0 |
7660.3 |
|
83054.0 |
7890.1 |
|
85545.7 |
8126.8 |
|
88112.0 |
8370.6 |
|
90755.4 |
8621.8 |
|
93478.0 |
8880.4 |
|
96282.4 |
9146.8 |
|
99170.9 |
9421.2 |
|
102146.0 |
9703.9 |
|
105210.4 |
9995.0 |
|
108366.7 |
10294.8 |
|
111617.7 |
10603.7 |
|
114966.2 |
10921.8 |
|
118415.2 |
11249.4 |
|
121967.6 |
11586.9 |
|
125626.7 |
11934.5 |
|
129395.5 |
12292.6 |
|
133277.3 |
12661.3 |
|
137275.7 |
13041.2 |
|
141393.9 |
13432.4 |
|
145635.7 |
13835.4 |
|
150004.8 |
14250.5 |
|
154505.0 |
14678.0 |
|
159140.1 |
15118.3 |
|
163914.3 |
15571.9 |
|
168831.7 |
16039.0 |
|
173896.7 |
16520.2 |
|
179113.6 |
17015.8 |
|
184487.0 |
17526.3 |
|
190021.6 |
18052.1 |
|
195722.3 |
18593.6 |
(c) Superannuation assessment
|
Future value (DIY Mix) |
8501499.26 |
|
Online share trading |
458796.68 |
|
Crypto currency performance |
452698.70 |
|
Exchange Traded Funds |
481574.43 |
|
Premix options |
492470.08 |
|
Share market |
459065.71 |
|
Term deposit |
496209.58 |
|
Premixed |
480664.20 |
On the basis of above analysis of superannuation account under the Australian market, it is determined that the DIY mix is performing well in the superannuation investment option from the 3 Australian superannuation providers (Apra, 2018). All the choices are different from each one as share or stock is common among the 9 options and the remaining are different to each other. So the DIY mix of Australian super company is performing well among the chosen options for investment from the superannuation account.
Conclusion
On the basis of above conclusion, it can be said that the Australian government has implied the laws for superannuation which is supportive for the employee at the time of retirement. It can also be stated that the 9.5% is the rate of contribution which is made by the employer in the super fund of employees. It can also be summarized that the DIY mix investment option is better to adopt for investing.
References
ACX, (2018). Cryptocurrency. Retrieved from: https://acx.io/
Apra, (2018). Annual Fund-level Superannuation Statistics. Retrieved from: https://www.apra.gov.au/publications/annual-fund-level-superannuation-statistics
ATO, (2017). How much to pay. Retrieved from: https://www.ato.gov.au/business/super-for-employers/how-much-to-pay/
ATO, (2017). Super and tax. Retrieved from: https://www.ato.gov.au/individuals/super/super-and-tax/
Australiansuper (2018). Your DIY Mix investment options. Retrieved from: https://www.australiansuper.com/investments/your-investment-options/diy-mixed-investment-choice
Australiansuper, (2018). Our Performance. Retrieved from: https://www.australiansuper.com/compare-us/our-performance
Australiansuper, (2018). Your PreMixed investment options. Retrieved from: https://www.australiansuper.com/investments/your-investment-options/pre-mixed-investment-choice
Canstar, (2018). Compare Exchange Traded Funds (ETFs). Retrieved from: https://www.canstar.com.au/etfs/?profile=Australian+Broad+Based
Canstar, (2018). Online Share Trading Star Ratings. Retrieved from: https://www.canstar.com.au/wp-content/uploads/2018/05/Crystal-Reports-Online-Share-Trading-2018.pdf
CCH, (2013). Australian Superannuation Legislation, 2012. Australia: CCH Limited.
Commbank, (2018). About the Investment Growth Bond. Retrieved from: https://www.commbank.com.au/personal/investments/investment-growth-bond.html?ei=nav-IGB
Commbank, (2018). Investing. Retrieved from: https://www.commbank.com.au/investing.html?ei=mv_investing
Commbank, (2018). Term Deposits. Retrieved from: https://www.commbank.com.au/banking/term-deposits.html?ei=sa-td-learn-more
Commsec, (2018). Market insights. Retrieved from: https://www.commsec.com.au/market-news/the-markets.html
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