The recognition of superannuation funds being an extremely tax-effective investment vehicle is set to increase in 2018, sparking a rise in the popularity of super for saving and investing, an accounting firm partner has predicted.
“Negative gearing hasn’t been working so well with the low interest rates [we’ve seen] for the last few years and all the agri-schemes seem to have disappeared, so the big deductions people were claiming there in the end actually resulted in big losses,” HLB Mann Judd Sydney wealth management partner Jonathan Philpot said at an industry briefing in Sydney today.
“So it’s been quite difficult for clients to find ways to get their tax down. But with the changes to super starting 1 July 2017, so this is the first year it’s in place, [with] PAYG earners being able to claim a personal super deduction for amounts they put into super, I think will actually open up the discussion more so at year end when people are looking for those deductions.”
Philpot pointed out it would most probably be a specific group of taxpayers from which an increased interest in superannuation would come.
“[It’s attractive if] you’re earning above $80,000, so you’re up into that 39 per cent tax bracket, including Medicare levy, the net tax benefit you’d receive is 24 per cent, 39 per cent less your 15 per cent tax in super, but personally you’re still receiving that 39 per cent tax benefit from making those super contributions,” he pointed out.
With regard to demographics, he suggested the strategy of making additional personal contributions into super would appeal most to individuals aged 40 years and above. He also emphasised the person’s income level had to be high enough to justify the move.
“Being able to put a large amount into super personally, it’s $25,000 less whatever SG (super guarantee) contributions go in on your behalf, I think will become far more relevant in discussions leading up to year end,” he said.
The strategy would not be as attractive for 25 to 30 year olds as they may not want to lock away money into their superannuation funds for an extended period of time, he added.