Clients successes

Why is everyone talking about super?

Superannuation for many is viewed as an investment. However, with the proposed legislation, people are now coming to realise that superannuation is a tax structure that investors can use to enhance their funds. Where individuals decide to invest those funds will determine how well your superannuation will perform.

The superannuation environment provides investors a place to put funds and have the earnings concessionally taxed. Individuals can also gain a tax benefit when making contributions into superannuation.

Consider a simplistic example of an individual contributing $100,000 of pre-tax salary into superannuation. After allowing for the government's contribution tax of 15%, this person is left with $85,000 to invest inside the superannuation environment.

Contrast this with the same person taking the $100,000 as salary and they are on a marginal tax rate of 41.5%. They are left with $58,000 to invest.

Therefore even initially this person is $26,500 better off contributing to superannuation than receiving it as normal income.

Let's take this example a step further. Assume this money is invested for 10 years under both scenarios with a tax rate of 15% in superannuation and 41.5% in the individual's name.

If the investment earned 7% per annum the $58,500 would grow to $95,000 whilst the initial $85,000 held in superannuation would grow to approximately $138,000.

Over 10 years this represents an additional $43,000 within the superannuation environment.

As shown above, by utilising the benefits offered by superannuation a person can accrue a significantly greater amount of money that could allow them to retire earlier or allow them to enjoy a better lifestyle in retirement.