AMP has shared with us this video that will look at ways your super can save you on tax. You can watch the video here or read the transcription below.
Hi, I’m Fabian. I work at AMP. Like most people, I care a lot about my financial future and because I’d rather my money went toward my future than towards paying tax, I’m very interested in the tax benefits of superannuation.
You see, superannuation is a tax structure designed for long-term investing. It can help me reduce the amount of tax I pay regardless of the type of investment I choose. That helps me with my long-term savings. I want to share with you what I’ve learned and that’s the three ways your super can save you tax.
Obviously, this doesn’t take into account your personal circumstances so you’ll need to consider them before making any investment decisions.
Now, the first tax saving can come when you put your money into superannuation. You see, if you invest outside of super, then you’re only able to invest money after you’ve paid income tax on it. Typically that’s between 30 and 45 percent plus Medicare levy, but if you put that money into super as a before tax contribution, even after deducting a 15% superannuation tax, that’s effectively a tax saving on your salary of generally 15 to 30 percent. This means you’ll have more money invested and more money working for you.
Not only can you save money by making before tax contributions but in some circumstances, if you’re working and are a low to middle income earner, you may be eligible for a government co-contribution.
Now there are some limits on how much you can put into super and if you go over these limits, there are significant tax penalties. You may want to talk to a financial planner about these.
Now, the second place you can save on tax is once the money is invested and growing within your superannuation fund. If you have an investment outside super, say a term deposit or shares, you’ll pay tax at your personal tax rate on the earnings from that investment. Again, this could be between 30 and 45 percent plus Medicare levy but if it’s within super, you’ll only pay 15 percent tax on the same investment earnings. Less tax means you get to keep more of it and keep it growing faster.
Thirdly, you can save on tax when you cash in your superannuation. That’s because once you reach age 60, assuming you’re able to pull your money out because you’re retired or you’re drawing a pension, then that money will be paid to you completely tax free.
The point at which you make your investment, the period of growth, and the time when you cash your investment in, are three important financial steps in your life. Super can help you save tax at each of these steps which means if you’re keen to put away to money away for your future, the superannuation tax structure could be a very rewarding way to save.