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Taking into account historical investment returns, particularly five and ten year returns may give you a better indication of how your super is performing over the longer term.
It's important to remember that investment markets move in cycles and experience volatility from time-to-time. Your super’s investment performance will vary each year, but investing for the long-term gives your money a greater opportunity to grow over time, so you can reach your retirement savings goals.
Tax savings
One of the greatest benefits of super is the tax savings that come with it— super attracts lower rates of tax than most other investments (such as shares or property).
Investment returns within super are taxed at up to 15%, whereas investment returns outside of super may be taxed at up to 46.5%. Saving up to 31.5% tax on your investment return could mean the difference between a comfortable retirement and an adequate one.
Making voluntary salary sacrifice (pre-tax) contributions comes with its own benefits—not having to pay income tax on these amounts. You’ll pay only 15% tax on these contributions up to the concessional cap, which may be substantially less than the income tax you would otherwise pay.
Don't forget that once you turn 60 and have retired, you can take your entire super benefit tax-free.
You may also be eligible for the Government's co-contribution. If you earn up to $31,920 in the 2010/2011 financial year, every dollar you additionally contribute (after-tax) to your super will be matched by the government, up to a limit of $1,000. If you earn up to $61,920 you can still receive a co-contribution, but at a reduced rate. To find out more about the Government’s co-contributions, and whether you’re eligible please click here.
Super Legislation changes
You may have read about the Cooper, Henry or Ripoll reviews making recommendations about super. At this stage, none of the recommendations from these reviews have been made law.
Although this uncertainty can be daunting, please remember that the recommendations are designed to improve the way super operates.
On the whole, super is still one of the most tax effective ways for you to save for your retirement— just remember to keep your eye on the big picture.
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