The tax incentives on Australians’ super contributions can welcome better investment returns in an environment full of low investment returns. Experts advise that by learning how to properly understand your super, and what it can do for you, you can save a lot of money.
Australian super contributions dropped 0.3 per cent last financial year, despite a growing working population and rising wages, with the June quarter falling a staggering 0.8 per cent. Wealth for Life Financial Planning principal Rex Whitford believes that the lack of trust between Australian people and the government has developed due to the chopping and changing of the rules when it comes to super. If you are unfamiliar with the latest super changes check out some of our ‘super’ blogs.
Despite the changes, super is still the most tax-effective structure to hold your life savings. Your super is more than just cold hard cash. It can hold property, bonds, shares, infrastructure, or a mixture of these. Maximum Wealth Advisers partner Mauro Grossi says that saving diverted to super at only 15 per cent – instead of your marginal tax rate – can add-up over time. “It’s not the government’s money. It’s your money for your future. If it was sitting in a bank account you would be far more worried about it.”
So how can super tax actually help?
- Earnings within super are taxed at only 15 per cent, rather than marginal tax rates
- Tax-deductible contributions, such as salary sacrifice, get taxed just 15 per cent. Whereas your wage income tax can be up to 49 per cent.
- Tax on withdrawals, income and capital gains for most people aged over 60 is zero
- The planned rule changes do not affect these tax rates. They only cap how much you can contribute, and will adjust super savings above $1.6 million per person out of the zero-tax environment and into the 15 per cent tax environment.
We highly recommend that you invest some time into understanding your super and learning what it can do for you, even before retirement. We have a team of highly trained, and knowledgeable experts that would love to have a chat with you, should you wish to learn more.