Superannuation – should we still bother?

Superannuation is still the best tax environment!

There have been many changes to Superannuation over the last 10-15 years. For many Accountants and Financial Advisors, dealing with these changes has been beneficial due to the extra work it has created.

But for your everyday superannuation members, it has diminished their confidence overall in the system. It has led many people to question whether to bother with super at all “Why should I bother when they keep tinkering with it?”, “They keep getting more hands on our money!”, “Why save when we can just rely on a government pension?”

Still the best tax environment

Although there is no guarantee that governments won’t change the goalposts again, they will always need to provide an incentive for people to put money into super to fund their own retirement. This means there will always be a concessional tax rate. It is worth reiterating that Superannuation is not an asset class but rather a tax structure. For many, super is still and always will be the best tax environment rather than their marginal rate which can be up to 47%.

Advantages of Superannuation

  • It is still the best environment from a tax point of view. Any earnings and gains at the fund level are taxed at 15% (or 0% if you have an account based pension up to the $1.6M cap).
    Below is an example of the tax implications of receiving a dividend inside of super as opposed to outside.
    John receives a fully franked dividend from a listed company of 7,000 ($3,000 franking credit attached). He earns other income in his own name of $200,000 so is in the top marginal tax rate of 47%.
 In Super – Accumulation (15% rate)In Super – Pension
(0% rate)*
Outside of Super
(47% rate)
Taxable Income$10,000$10,000$10,000
Tax Payable$1,500$0$4,700
Less Franking Credit($3,000)($3,000)($3,000)
Tax Payable (Refundable)($1,500)**($3,000)**$1,700

*This is subject to the $1.6M transfer balance cap limit when a member is in pension phase

  • It is a great vehicle to build your wealth and retirement savings over the long term. With the lower tax rate and the benefit of compounded earnings over a long period of time, you can maximise your retirement savings.
  • A couple can accumulate approximately $3.2M ($1.6M each) in a low tax environment. This can be done with a combination of concessional contributions (cap is $25,000 per annum) and non-concessional contributions (cap of $100,000 per annum or $300,000 over a three year period under the bring-forward rule).
  • Your concessional contributions can be split with your spouse.
  • You can salary sacrifice some of your salary & wage into superannuation ($25,000 cap which includes super guarantee) and pay 15% tax on that income rather than marginal tax rates.
  • Direct property can be purchased in superannuation structure (only in a Self-managed Superannuation Fund).
  • Parents that can afford to can contribute into their children’s superannuation every year. This creates a deduction and a tax refund in the child’s personal return as well as giving them a great head start to building their superannuation .

If you would like more clarification about your superannuation or would like to discuss a self-managed superannuation fund, please contact one of our Super Specialists, complete your details below and we’ll be in touch or give us a call on 03 9835 8200.

About the Author
Nick Petaroudas
Nick joined Accru Melbourne in 2011 and has over 15 years’ experience working in the public practice servicing clients in business services. He is our Superannuation Specialist and prides himself on being a Technical Superannuation Expert.
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