Glossary
A
Accumulation account
An Accumulation account uses the principles of addition and subtraction. On the plus side are contributions paid by you and your employer, as well as the investment returns (or interest) you earn. On the minus side are fees and possibly taxes and insurance premiums.
Age pension
A fortnightly income paid by the Commonwealth Government (through Centrelink) to retired people. Men can access the age pension from 65 and for women it is available between 60 and 65. Centrelink has criteria that must be met before a person is eligible to receive the age pension. For further information, contact Centrelink.
Alternative assets
Alternative assets occupy the middle ground between defensive and growth assets. They are non-traditional and include unlisted investments, such as infrastructure and private equity, and diversified investments, such as hedge funds, commodities, and timber. Alternative assets offer significant diversification benefits.
Asset
Something you own, such as a house, shares, or cash.
Asset allocation
The percentage of assets invested in each asset class, e.g. cash, fixed interest, property, shares, or alternatives.
Asset class
A category of financial assets. The major asset classes are shares, property, fixed interest and cash. These can, in turn, be invested in Australian or international shares, Australian or international fixed interest, direct or indirect property, and so on. Each asset class has different risk and return characteristics.
Assets test
One of the two means tests applied by Centrelink to assess whether an applicant can receive social security benefits. The other test is the income test.
Association of Superannuation Funds of Australia (ASFA)
The national association for the entire superannuation industry. Represents industry interest at the government level and runs education courses.
Australian Securities and Investment Commission (ASIC)
Responsible for consumer protection in financial products. Monitors and promotes market integrity, particularly in connection with product disclosure.
Australian Prudential Regulation Authority (APRA)
Formerly known as the ISC (Insurance and Superannuation Commission). Commonwealth Government authority responsible for prudential regulation of the financial sector, including insurance companies and superannuation funds.
Average Wage option (AWO)
One of the options available to QSuper members with a deferred retirement benefit. It allows you to leave your Average Wage value with QSuper until age 55, where it is indexed by AWOTE from resignation to age 55.
Average Weekly Ordinary Time Earnings (AWOTE)
A measure of wage and salary levels of Australian employees released by the Australian Bureau of Statistics.
Average Wage value (AWV)
The value of a deferred retirement benefit based on a member leaving it indexed with average wages growth (AWOTE) to age 55.
B
Balance sheet
A statement at a point in time of all the assets and liabilities of a company or an individual (like you).
Beneficiary
A person who will benefit from a deceased person's estate, from a death benefit paid by a super fund, or a payment from a life insurance policy.
Bonds
Medium to long-term fixed interest investments issued by governments and companies to raise capital.
Budget
A plan setting out how much money you need for living expenses.
C
Cash
Part of an investment portfolio invested in the short-term money market. The capital will be secure and it is highly liquid. Over the long term, returns will be lower than fixed interest, property, and shares.
Capital gain
The profit made by buying an asset and then selling it for a higher price.
Centrelink
A government agency that is responsible for assessing and paying social security payments.
Co-contribution
Contributions made into super by the Commonwealth Government as an incentive for members to make personal contributions.
Compassionate grounds
A special condition when super can be released before retirement. Generally, the Australian Prudential Regulation Authority (APRA) will individually assess each case, but permission is likely to be granted where you have pressing personal or family medical expenses or are at risk of having your home repossessed. Currently QSuper assesses applications from members, in line with legislation, for release of funds relating to these special conditions.
Complying pension
A special sort of private pension that will provide the pensioner with social security and tax benefits. Note: A QSuper pension is not a complying pension.
Compounding
Reinvesting the returns from your investments so your assets grow faster. Sometimes called earning interest on your interest.
Concessional contributions
Contributions that have 15% contributions tax deducted on entry to super. Concessional contributions include before-tax (salary sacrificed) contributions, contributions where a tax deduction has been claimed, and employer contributions. These contributions are included in the taxable component of any payment. See taxable component.
Contributions
Payments made into super by an employer, you, your spouse, or the Commonwealth Government.
Credit
The willingness of a lender to advance money as a loan.
D
Defensive assets
Assets that receive an income return but will not provide capital growth – like cash and fixed interest. Sometimes called conservative assets. See also growth assets.
Deferred retirement benefit
The employer financed part of a QSuper Defined Benefit account. On resignation before age 55 or internal transfer to the Accumulation account before age 55, a member has two options. They can leave it to grow with AWOTE as an Average Wage value, or convert it to an Investment Linked value, where it can be invested in a QSuper Accumulation account or rolled over to another super fund.
Defined Benefit account (closed to new members)
A superannuation account where a guaranteed benefit is calculated according to a formula. Your benefit depends on your salary, the amount you contribute, and your time as a contributing member.
Dependant
A person who relies on you for financial or emotional support. In super, your spouse is always counted as a dependant. If your children are under the age of 16, or in full-time study and under the age of 25, your children are considered your dependants.
Diversification
Spreading your investments among different assets to minimise the impact of poor performance by one asset. Not 'putting all your eggs in the one basket'.
Dividend
A share of the profits of a company paid out to its shareholders.
Deductible contribution
A contribution into super by an employer or by someone who has claimed a tax deduction for that contribution.
E
Eligible termination payment (ETP)
Most commonly a lump sum payment from a super fund prior to 1 July 2007.
Employment termination payment (ETP)
A payment made by an employer to an employee who has taken a retrenchment package. A portion of the lump sum payment may be eligible for special tax treatment.
Estate
The assets and liabilities that belong to a person when they die.
Equity
Ownership of an asset. Commonly used to describe the money you would have if you sold a property and paid off an associated loan.
Executor
A person, persons, or organisation that you appoint to administer your estate according to your will.
F
Final average salary
Used in the calculation of benefits for members with a Defined Benefit account. In a QSuper Defined Benefit account, for members who resign after age 54, the final average salary is a time weighted average of the member's last two 1 July salaries.
Financial hardship
Special condition when super can be released before retirement. It requires the person to have been receiving social security benefits for an extended period and be unable to meet pressing living expenses.
Fixed interest
Investments where the interest rate is fixed in advance and capital is repaid at maturity. Examples are bonds, bank bills, and debentures.
Fund
Where a number of investors pool their money. The money is used to buy and manage a set of assets and the fees and conditions are the same for all the investors. Common examples are a super fund (like QSuper) and a managed fund (like the Investment Access Funds through Q Invest).
G
Growth assets
Assets that have the potential to achieve capital growth over the medium to long term – primarily shares and property. Also called "aggressive assets".
H
HECS
Higher Education Contribution Scheme. A loan advanced to students in tertiary study to pay for course fees.
Hedging
Steps taken to reduce the risk of a loss, for example, in respect of foreign currency transactions. Hedging is similar to insurance.
I
Income test
One of the two means tests applied by Centrelink to assess whether an applicant can receive social security benefits. The other test is the assets test.
Inflation
A measure of the average increase in prices over time.
Interest
The income paid by cash and fixed interest investments, such as bank accounts, term deposits, and government bonds.
International shares
Shares where the home exchange is not Australia. Also called overseas and global shares. Australia is less than 2% of the world's sharemarkets.
Investment Linked option
One of the options available to QSuper members with a Defined Benefit account. On resignation before age 55 or internal transfer to the Accumulation account before age 55, they can choose to transfer part of their benefit (the Investment Linked value) to another super fund, or a QSuper Accumulation account.
Investment Linked value
The present value of a deferred retirement benefit.
Investment mix
At QSuper, this refers to the way in which an Accumulation account member has chosen to invest their money
Investment preference
At QSuper, this refers to the way in which an Accumulation account member wishes future contributions to be invested.
Investment option
Many super and managed funds give investors a choice in the way their money is invested. Investors are able to choose from a range of portfolios with different risk-return characteristics. At QSuper members can choose a Ready made option (such as Cash Plus, Balanced, Socially Responsible, Basic Growth, and High Growth) or create their own portfolio with the Your choice options. These include Cash, Fixed Interest, Australian Shares, and International Shares portfolios.
J
K
L
Liability
Something you owe like a debt or a loan.
Life expectancy
Tables produced by the Commonwealth Actuary showing the average number of years you can expect to live.
Liquid asset
As asset that can be quickly converted to cash, such as fixed interest investments and shares.
Lost super
When a super fund loses contact with one of its members, it must report the details to the Australian Tax Office as “lost”. The ATO has a lost members information service to help you recover your lost super.
M
Managed fund
An investment like a super fund, though without the same tax advantages or restrictions as super. A number of small investors pool their money and have it invested by a specialist manager. An example is a Q Invest Investment Access Fund.
Market linked income stream
A form of pension that has less flexibility but qualifies as a complying pension. This may allow the pensioner to receive more tax effective income or qualify for the age pension. Also known as a term pension or growth pension.
Means testing
Examining the financial resources of a person to see if they qualify for social security benefits. Social security is targeted at people with lower levels of assets and income. See income and assets tests.
Member
A person who has money held for them in a super fund.
Member benefit statement
At QSuper, the annual statement you receive that shows movement on your account, insurance details, and the current value of your benefits.
Multiple
Part of the formula used to calculate defined benefits at QSuper. It is derived from the amount you contribute and the time you have been contributing. For a full-time member contributing at 5% of their salary, the multiple increases by 0.21 per year.
N
Net worth
The difference between what you own (your assets) and what you owe (your liabilities).
Non-concessional contribution
These are contributions made from after-tax income and include personal after-tax contributions and spouse contributions. These contributions will be included in the tax-free component of any payment.
O
Ordinary time earnings
Your normal pay less overtime and some other allowances. Used to calculate the 9% superannuation guarantee.
P
PAYG tax
The pay as you go income tax system, where deductions are made from your income throughout the year as tax instalments.
Pension
A series of regular payments over a term, or until the pensioner dies. Also called an income stream or an annuity.
Post-1983 component
Previously formed part of an eligible termination payment (ETP). If it was taken as a lump sum after age 55, the first $135,590 was tax-free and the balance was taxed at 16.5%. This limit was indexed at 1 July each year. Since 1 July 2007, this component forms part of the taxable component in the payment of benefits. Please refer to ‘Taxable component’ and ‘Tax-free component’.
Pre-1983 component
Previously part of an eligible termination payment (ETP). If it was taken as a lump sum, 5% is added to the member's assessable income and taxed at their marginal tax rate. Since 1 July 2007, this component forms part of the tax-free component in the payment of benefits. Please refer to the taxable component and tax-free component references in this glossary..
Preservation
The rules that restrict access to super until retirement, or when some other defined event occurs.
Preservation age
Age at which a person can retire and access their superannuation. Currently age 55, gradually increasing to age 60.
Property
Investment in real estate, such as residential property, office blocks, factories and shopping centres. One of the four major asset classes. Considered a growth asset, as it is expected to increase in value over the long term faster than inflation.
Q
QSuper Pension account
An QSuper Pension account allows you to draw a regular income, with the potential to minimise your tax in retirement. Find out more about opening a QSuper Pension account.
R
Reasonable benefit limit (RBL)
Prior to 1 July 2007, this was the maximum amount of concessionally taxed super that an individual can receive in their lifetime. RBLs were abolished on 1 July 2007.
Rent
Periodic payment for the use of a property.
Return
The profit you make from an investment, including income and capital gains.
Risk
The chance that an investment may not produce the return you expected. It may return more or less than you expect.
Risk-return
The investment rule that you should expect a higher return if you take on more risk. Cash is low risk and low return. Shares are higher risk and should produce a higher return over the long term.
S
Salary sacrifice
Arranging with your employer to reduce your salary and pay the amount directly into super instead. It is a tax effective way to make super contributions.
Shares
Investment in a share of publicly listed companies, such as BHP Billiton, Westpac, and Woolworths. One of the four major asset classes. Considered a growth asset, as it is expected to increase in value over the long term faster than inflation. May be volatile in the short term.
Standard contribution
In a QSuper Defined Benefit account, the default standard contribution is 5%. For police officers, the default standard contribution is 6%.
Superannuation
Super is a tax effective way to accumulate money for retirement and to provide an income in retirement.
Super guarantee
Employers must pay 9% of your ordinary time earnings into super each quarter.
Super surcharge
The surcharge was an extra tax on the employer and deductible contributions made by “high-income” earners between 20 August 1996 and 1 July 2005. Members retain their existing surcharge assessments. Surcharge is held as a debt against the member’s account. When a withdrawal is made, the debt is paid by the super fund and recouped from the member’s account.
Superannuable salary
The superannuable salary is the portion of an employee's remuneration package on which superannuation contributions are calculated, and is defined in the QSuper Trust Deed as fixed and permanent remuneration.
T
Tax deduction
An expense you incurred while earning income. It can be deducted from the taxpayer's income to reduce the total income that is taxed.
Tax-free component
The tax-free component is the portion of a member’s benefit on which no tax is payable. A superannuation lump sum is proportioned between two components, the tax-free component and the taxable component.
Tax offset
A reduction in the amount of tax paid. Also known as a tax rebate, or tax credit.
Taxable component
The taxable component, which is concessionally taxed based on your age, and is tax-free to those 60 and over. A superannuation lump sum is proportioned between two components, the tax-free component and the taxable component.
Temporary disability
Usually when a person has used up their sick leave and is unable to do their own job, but is expected to eventually resume work.
Total and permanent disablement (TPD)
Usually considered to be when a person is unlikely to be able to work again in any position for which they are suited, based on their education, training, or experience.
Trauma insurance
Insurance that pays out a lump sum if you are diagnosed with a specific medical condition, such as cancer, heart attack, or stroke.
Trust fund
Money held and invested for the benefit of others. A super fund and a managed fund are usually set up as a trust. You can set up a trust fund in your will for your children.
Trustees
The group of people or the directors of a company who are responsible for running a super fund.
U
Undeducted contributions
This was the terminology used before 1 July 2007 for contributions made into super after 30 June 1983 for which the contributor did not claim a tax deduction. Since 1 July 2007, this type of contribution is referred to as a non-concessional contribution.
Unit of insurance
One unit of insurance cover provided in QSuper is $100,000 for members under age 35. The value of a unit decreases after age 35 and is zero at age 70 (age 65 for police officers). Members are covered for death-only cover after age 65. Members can elect to buy extra units of cover.
Unit price
Each investment option has a unit price that is set daily depending on the value of the assets held in the option. When you invest, you buy a number of units at that day's price. Units work like share prices – as the investments increase in value the unit price goes up. Of course, unit prices can also go down if investments decrease in value.
V
Volatility
The variability of investment returns. For shares, the dividends depend on company profitability and the share price depends on economic fundamentals and the state of the sharemarket. The returns can vary significantly over the short term and be negative or positive.
W
Will
A legal document setting out how a person wants their assets distributed upon their death.
Work test
Once a person turns 65 they must satisfy a work test before they can make contributions to a super fund. The work test requires a person to be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during a financial year. Once they turn 75 they are unable to make super contributions regardless of their working status.
X
Y
Z