Skip to main content

Is my Superannuation being taxed?


Many of you may have noticed on your recent superannuation statement that an amount has been deducted for tax. Superannuation tax can be a little confusing, many people in fact believe that they pay no tax in their super.  Unfortunately this isn’t true.
Each year your employer pays 9.5% of your salary into your nominated super fund in order to meet their Superannuation Guarantee obligations.  For every dollar that your employer pays into your fund, 15% of it is taken as contributions tax.  It’s worse if you earn over $300k per year when the tax paid jumps up to 30%.
If you’re a savvy investor, you’ll have your super invested in funds that earn income throughout the year.  Be it interest, rent, dividends and so forth.  These earnings don’t escape tax. They are in fact also taxed at 15%.
Of course these tax rates are well below most people’s personal tax rates.  So having your money in super does mean you’re paying a lower rate.  The trade off for this is that you can’t access your money until you reach preservation age which for most of us is age 60.
So what does all this mean? The fact is, no one likes paying tax, and tax on super is difficult to minimise as you can’t apply any personal tax deductions to your super fund.
Is there anything you can do?  There are two things you can do to help.  Firstly you can invest in good quality superannuation funds that enjoy strong growth rates.  This won’t reduce the tax paid but you won’t mind as much if your balance is growing strongly. 
The second thing you can do is be mindful that most high quality superannuation funds allocate part of your money to Australian based, high quality shares.  These shares for the most part, enjoy tax credits on the income they earn.  It’s a little complicated, but the income earned (known as dividends) will often have an associated tax credit that can be used by your super fund to offset tax paid on the earnings.
Understanding tax is a full time job and best left to the experts.   However, you should at least be aware of what you’re paying and by taking a few prudent steps, do your best to minimise it.
An event plug now...if enjoying some pizza and beverages while being at an information session about "you and your super" sounds reasonable to you,  I am holding an informal session later this month - find out more about the Pizza Business After Hours here. 
Andrew O’Brien and Hindsight Group Pty Ltd t/as Hindsight Wealth Pty Ltd (ABN 88 168 442 528) are Authorised Representatives of Synchron AFS Licence No 243313.  Andrew O'Brien. FINANCIAL ADVISER. P 07 3852 3025  M 0403 156 625  E andrew@hindsightwealth.com A Suite 4 / 30 Florence Street, Newstead QLD 4006.  View our Privacy Policy here. 

Labels:

Comments

Post a Comment

Popular posts from this blog

Times are tough. How can you position yourself to minimise the impact?

The last few weeks have been extraordinary to say the least. We’re battling a world wide health crisis and we face uncertainty in many aspects of our lives.  It’s true that there are simply some things beyond our control and we will more than likely see many changes to our everyday lives for the remainder of 2020 and beyond. So, what can be done?  On the other side of this, many people will be left with dramatic financial stress, whether it be periods of unemployment, depleted cash reserves or battered superannuation balances.  And for many, timing will be an issue. Those who were weeks ago contemplating retirement may now need to change their plans. And those that are still accumulating for retirement have more than likely just seen their investments and superannuation return to levels of 5 or 6 years ago. Essentially the clock has be wound back in one way or another.  It may well be a good time to take stock and lay some foundations for when thing...
Post a Comment
Read more

There is no better time than right now to review your super!

So by now we all know that Australian and global investment markets have fallen significantly, it’s on the news, in the papers and I’ve been publishing recent posts about it on LinkedIn. What’s causing it?   Truth is, it doesn’t really matter.  Oil prices are down, there’s talk of China slowing, commodity prices are down and so forth.  Historically there is always something occurring on the world stage that can cause negativity in markets.  Investors start to worry, they sell their investments at low prices, lock in losses only to have someone come along, buy them up and enjoy the gains as things recover. Warren Buffet, the world’s most famous stock market investor famously said, “The stock market is a device for transferring money from the impatient to the patient”. And we can see this today.  As I write this, global stock markets suffered a large decline over night, with the expectation being that the Australian market would follow this morni...
Post a Comment
Read more

Are You Starting Again?

For those of you currently working in the resources industry, you would no doubt understand that the potential downside is the punishing rosters and long periods away from home that can take a toll on your family and personal life. Sure, the money is good for the most part, but it comes at a cost. Unfortunately, many marriages suffer irreparably and many industry workers find themselves having to “start again” after relationship breakdown and divorce.  It can be an extremely difficult time and apart from the emotional strain, there’s the stress of having to rebuild financially.  Quite often, you may find yourself in a situation where you’re left with minimal assets and essentially must start again. In this situation, it’s critical to make sure you have your superannuation structured and invested correctly. If you’ve come through a divorce with your superannuation intact, it may end up being your biggest asset. You really need to get it working for you. The othe...
Post a Comment
Read more