Superannuation-do-or-do-not

Despite the GFC being over for quite some time, there are still ‘non-believers’ of superannuation. People may have been well on their way to early retirement before the GFC hit and wiped out their hard-earned wealth, but allow me to clarify something. Superannuation is not a product, it is a tool a vehicle – if you will – to get you from point A to point B. Imagine you were driving a car and had unfortunately got into an accident that resulted in it being written off, regardless of whether you owned it in your own name or through your business the outcome remains the same: you no longer have a car.

The same can be said for superannuation.

If you had an impressive portfolio that was purchased through superannuation, the GFC would have had the same affect if you had owned it yourself, it’s just when it comes to superannuation we may have reaped the benefits that come from the favourable 15% tax rate. If your superannuation took a beating it’s because of the investments within it, not superannuation itself.

Superannuation, when utilised effectively, can be a great tax-planning tool. For business owners, making concessional personal contributions allows you to obtain a deduction, resulting in a saving of up to 34% for every dollar contributed, depending on which tax bracket you fall into. However, superannuation is not limited to people running their own business, employees can also salary sacrifice into their nominated superannuation fund as a pre-tax deduction, so in lieu of wages received you can elect to have your employer remit this to your superannuation fund on your behalf. Do bear in mind that there is a cap as to how much you can contribute to superannuation to the extent that you get a tax deduction. For those 49 and under the cap is $30,000, whilst if you’re over 49 the cap is $35,000.

If you have any questions talk to your Proactive accountant today.