Why super is still super – strategies for tax-effective investing

This year is likely to see more changes to the super and tax environment after the federal election, in addition to the last round of changes made in 2017. And this may lead some savers to question whether super is still worthwhile investing in. However, with up to $1.6 million in pension phase still tax free and taking into account outcomes from the previous round of reforms, there is still much to offer investors.

You should consider the following:

A change in thinking can help make your savings work harder

It wasn’t long ago you could salary sacrifice more of your annual pay, but with the 2017 introduction of a $25,000 per year limit for all ages (including over-65s who meet the work test), it made investors think more strategically about how to build that retirement nest egg. For high income earners especially, it meant the concessional contribution cap could be used up by compulsory employer contributions alone, leaving no room for additional salary sacrifice contributions. This meant making non-concessional contributions became a little more important to those planning for retirement.

Making non-concessional contributions can make a big difference

If you were taking advantage of the higher concessional limits that were in place before 2017, you may now have some extra cash flow from having to reduce your contributions. While it is not the traditional approach, making non-concessional contributions using this cash flow can add to your final super balance.

For example, a 50-year-old today starting with a super balance of $300,000 could retire with $1,145,000 at age 65 by making non-concessional contributions of $1,000 per month on top of their maximum salary sacrifice. If you’re a little closer to retirement, you could still build a super balance of $815,000 in 10 years with the same level of contribution. The additional dollars in your pocket could mean an extra holiday every year in retirement!1

Considering the $1.6 million transfer balance cap

It’s important to talk to your financial adviser about what you can do to make the most of your and your spouse’s super. As super is not accessible until preservation age at the least, it’s important to consider how long your savings are locked up for. Make sure you maintain a personal cash reserve to cover those unexpected expenses, and for the amount you choose to put into super, invest it in a way that is aligned to your risk appetite.

While the $1.6 million transfer balance cap may have initially impacted the plans of some retirees when it was introduced, the tax rates within super are still very hard to beat for proactive savers. In Australia, super is still one of the most tax-effective vehicles to invest, so, start planning early if you want to get the most out of your savings.

This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.

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Want to learn more about super?

Whether you’ve had the same super fund or investment structure in place for some time, your personal circumstances and balance may have changed – which is why it makes sense to review your arrangements. But where do you start? By using our simple guide, we show you five key areas you should consider when comparing options, which can help make it easier to make a more informed choice about your super and determine the most appropriate solution for you.

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Ishara Rupasinghe


Ishara Rupasinghe is a director of the Family Wealth Management team in Canberra, committed to   supporting clients in making the right financial strategy decisions to

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