Is Super really that Super?

Discussion in 'Investment Strategy' started by tk421, 2nd Feb, 2022.

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  1. Scott No Mates

    Scott No Mates Well-Known Member

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    But you're OLD :D

    It's the same as insurance bonds, you can't them for 10 years but the income is tax free afterwards. Much shorter timeframe for those with a desire to get their hands on the income earlier.
     
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  2. dunno

    dunno Well-Known Member

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    Is super that super? Yes and the sooner you understand it the better.

    Fully understood it is only a structure with very few limitations on how you invest. The only big limitation is no access until 60 in return for the tax benefits. The earlier you contribute the more you benefit and the less contributions you have to lock up.

    If you contribute 1K per month in your 20's and nothing further then (making some assumptions of 10% return and 15% tax rate on contributions and earnings) you would finish up with 2.8Million.

    Same assumptions but changing contribution period to 30' 40's etc to achieve the 2.8M outcome requires the following (which is not even possible under the contribution cap limitations)

    upload_2022-2-4_14-38-30.png
     
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  3. tk421

    tk421 Well-Known Member

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    I also like that you can distribute in the chance that you never get to draw on it, in that it can be an insurance and inheritance to partners, children, or even someone else from what i can tell.

    i know in my 20s i didn't think much beyond life at 30, yet here i am
     
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Especially when super policy since 1994 is framed around compulsory super and a legal obligation by employers supported by very generous concessions. So - Use it.
    The policy back peddle in recent years recognises the exceptionally generous benefits that were announced by Treasurer Costello 15 years ago which commenced in 2007. The bulk of taxpayers have adopted these benefits. Prior to 2007 super was seen as a smash and grab at retirement. Now its a lifetime nest egg.
     
  5. Hills123

    Hills123 Well-Known Member

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    This thread has been helpful!

    Just moved to the highest tax bracket so I’ve just started putting in $500 a month, but thinking I should probably put more - am in my early 30s!
     
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  6. Bris developer

    Bris developer Well-Known Member

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    Super is too inflexible . If you like leveraging up, refinancing, value add, control - way better keeping your money out of super

    it’s good for passive ungeared set and forget stuff (ie. blue chip shares)

    We liquidated the fathers SMSF last year. Commercial
    Property makes no sense in the smsf when you are borrowing 200
    basis points higher and at a 50% max LVR
     
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  7. kierank

    kierank Well-Known Member

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    Totally agree.
    I would go further - all direct property makes no sense.

    To me, it’s like pushing a square peg into a round hole.
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Like any decision, it depends. An owner-occupied business premises may make perfect sense in a SMSF - no vacancies, rent contributes to contributions, lease terms to suit owner (eg above market reviews), mandatory contributions still required. This can bolster super fund balances quickly & with lower risk.

    The trade-off is the business is also secure in the premises, able to have more flexible terms (to vacate or extend or sub-let etc).
     
  9. Bris developer

    Bris developer Well-Known Member

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    Agree. SMSF is a good trading vehicle as the CGT is low (10% vs 27.5% company rate).
    Many executives will hold their options/shares within their smsf to minimise tax when they vest.
    It’s probably not a bad strucure for trading shares or trading properties

    but cost of debt capital, equity LVR requirements & ability to refinance are MAJOR considerations for any property investor and SMSF fall short in all these areas. Many banks won’t even lend for certain asset classes (ie. fuel, childcare, vacant land) in smsf.

    many business premises are owned in the smsf to reduce tax: but once you factor in the higher borrowings and the pain in the ass factor - I think many will find you are only slightly ahead vs buying a property in a normal trust. When you sell you still get active business concessions and can wipe your CGT to almost nil outside super: each to their own though :)
     
    Last edited: 8th Feb, 2022
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  10. kierank

    kierank Well-Known Member

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    … ends up with a well-known potentially bad tenant :p
     
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  11. tk421

    tk421 Well-Known Member

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    think i mentioned it, that the liquid income producer for us is money in forex markets, got those running 30:1 100:1 even 5000:1 leverage short term, suits my short term style and its easyto draw on, super is just set and forget which is something im a bit hopeless at.
     
  12. Baker

    Baker Well-Known Member

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    Compulsory superannuation is a fantastic safety net for all the Dunning-Kruger investors out there (and in here).
     
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  13. Frenchie

    Frenchie Well-Known Member

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    I always tell these people - if are so good, why don't you work for a fund and make the big bucks?
     
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  14. Piston_Broke

    Piston_Broke Well-Known Member

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    Interesting, please post in the forex threads or create a new one.
    Other Asset Classes
     
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  15. tk421

    tk421 Well-Known Member

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    I'm not suggesting im fund worthy, but everything is online so it i easy for money to find me and i don't need the pressure of a bank or bank types in the background, there is also the problem of scale.

    To make 3-6% a month on what might be a bank fund of what? 10 mill ? i would need to get fills of 200 lots often multiple times a day, which might be fine on the majors but i trade some exotics and on quiet sessions even 10-20 lots will slip price, so in a way it pays to be small otherwise something else will have to suffer, in this case it would probably be the returns.

    I guess you could then say even 1% on 10 mil is better than 4% on 100k but that it would like turning your hobby into your full time job when really it is just a small income producer that doesn't raise too many eyebrows.. And im aware it doesnt last forever, constantly needs to be tweaked and i sometimes have it offline for a month or so, sometimes longer, not sure how well that would go down.

    Anyway, Super is Super given certain situations - fact confirmed!

    Funny thing happened just yesterday, some random retired guy drove past me in a car park and said "Hey mate, keep working hard, i need my part pension!" and promptly took off down the road in his oversized 4wd.
     
    Last edited: 10th Feb, 2022
  16. Sgav

    Sgav Well-Known Member

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    I don't know where to begin with how many flaws exist in this post.

    You think you can 'double/triple' the investments in Super? You know you can move your Super to an SMSF or Super that essentially lets you put 80% in to a brokerage account (within Super) and lets you buy what you want?

    Super is a tax haven that you can't beat anywhere else. The sheer arrogance of what you wrote is insane. Your bias that just because people you know don't put extra $ in Super goes against all data, science or research out there that would actually tell you how many 30 year old's in fact do.

    Best of luck with your investments.
     
  17. Sgav

    Sgav Well-Known Member

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    Depending how close you come to the 27.5k concessional cap each year (and the previous 3 or so years that you can go back and 'fill-up' (noting it'll soon be the last 5 years)) you have two options to consider if you don't hit 27.5k naturally via your salary.

    Option 1, salary sacrifice in to Super and lower your taxable income. For every $1 you put in Super only 15c will be taxed, compared to your current 47.5c tax per $ earned! You could continue to do this above 27.5k for the current financial year.

    Option 2, make a post-tax, manual contribution to your Super company. My understanding (please research this to ensure it's correct) is that if you put say $1000 in to your Super on 1 June, what would happen is:

    That $1000 you have in your bank account would have come from a pre-tax income of around $1525 (47.5% of 1525 = around $1000). So when you put it in Super and it's within this year (or previous years concessional contribution caps) you get the 32.5% back that you were taxed (47.5%) above Super's 15% tax. So your $1000 turns in to $1296 once it goes in to your Super. My understanding (please get advice as to whether this is correct) is that the extra $296 will be made available to you as a 'tax credit/refund' when you do your tax return.

    Option 1 would have put that extra $296 in to super via salary sacrificing. Option 2 will provide th $296 as a tax refund/credit (pending the rest of your tax return's situation).

    TLDR: For every $1000 you put in to Super via either method you will get close to 30% extra. That's a 30% head start compared to putting that $1000 in an ETF. Given average stock returns are 7% or so per year, super really is super.

    p.s. via My Gov > ATO you can very easily identify how much of your previous years concessional caps you can go back and fill up (once you fill your current financial years cap!)

    p.p.s if you do option 2, you need to fill out a form and notify the super company you are making a post-tax additional contribution to your super. Advice I have heard is to allow at least 3-4 weeks for the form to be received and actioned, so best do it no later than 1 June per financial year.

    p.p.p.s get proper advice, as always!
     
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  18. Luca

    Luca Well-Known Member

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    Started looking into this probably a bit late however better late than never :)
    Am I right in saying that the ideal scenario could be:

    1) Let`s say the transfer balance cap is $1.7M x 2 (couple) = $3.4M. Get as close as possible to this number when you are 60. Invest in an ETF or similar, preserve the capital and live on the interests -> assume 6% -> 204k tax-free

    2) Buy as many properties as you can while keeping on track with point 1.

    What`s usually the exit plan with the properties to minimise the taxes? I guess the best is to pass the assets to the next-gen but obviously you don`t get the rewards :)
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Its not the usual plan, but a good one is to sell the main residence CGT free and move into an investment property - ideally the one that has the most CGT impregnation.
     
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  20. Travelbug

    Travelbug Well-Known Member

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    Yep! We have invested well and live on our investments.
    I didn't have much Super but salary sacrificed to he max the last 5 years of working. It's very tax effective. And drawing tax free money is a nice bonus.
    That money in Super is a nice backup, building at an average of 7% a year. Nice! And easy!
    My kids will probably get it.
     

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