Superannuation Advice in Perth…


your choice.

While it may feel like a long way away, it’s never too early to start thinking about your retirement and optimising your superannuation account.

Despite numerous changes to superannuation and pension funds over the years, ‘super’ remains a highly tax-effective way to save for retirement. And while it is by no means the only way to grow your wealth, superannuation should play a significant role in your overall financial strategy.

Essentially there are three types of superannuation funds in Australia, each with its own unique advantages (and disadvantages): ‘industry’, ‘retail’, and ‘self-managed’. While any one of these options can work well, the challenge is finding the most appropriate solution for you.

If you’re unsure about your new or existing super fund, it’s important to get a second opinion. A qualified financial advisor will consider your retirement goals and preferences, narrowing down the superannuation universe to a few ‘best’ alternatives.


SUPER VS OTHER INVESTMENTS…

Superannuation is a tax-advantaged, long-term savings structure designed primarily for retirement. Comparing it to other forms of investment like property, shares, or term deposits highlights several benefits, as well as considerations. Here’s a breakdown of the advantages of superannuation versus other investment alternatives…

1. Tax Advantages

  • Lower Tax on Contributions: Contributions to super (from employers or via salary sacrifice) are taxed at 15%, which is lower than most individuals’ marginal tax rates. This can significantly boost savings for those in higher tax brackets.

  • Tax on Earnings: Investment earnings within super are taxed at a maximum of 15%, which is often much lower than the tax on earnings outside of super, particularly for high-income earners.

  • Tax-Free in Retirement: Once in the pension phase, withdrawals and investment earnings within super are tax-free for individuals over 60.

Comparison with other investments…

  • Property and shares are taxed at the individual’s marginal tax rate, although capital gains tax discounts apply if assets are held for over a year.

  • Bank interest is taxed at marginal tax rates, with no special concessions.

2. Employer Contributions

  • Employers must contribute at least 12% of an employee’s ordinary earnings (Superannuation Guarantee), which is effectively "free money" for employees.

  • Over time, compounded contributions significantly increase the super balance without the individual needing to make additional investments.

Comparison with other investments…

  • Other investment options require individuals to provide all funding, with no mandatory employer contributions.

3. Forced Savings

  • Superannuation locks away funds until retirement (generally after age 60), reducing the temptation to dip into savings prematurely.

  • This enforced discipline ensures Australians have a nest egg for retirement.

Comparison with other investments…

  • Property or shares can often be liquidated (though illiquidity issues may apply to property), making it easier to access funds but harder to maintain disciplined savings.

4. Professional Management

  • Super funds can be professionally managed, providing diversification and expertise without requiring investors to make daily decisions.

  • Members can also choose between different investment options (e.g., balanced, growth, or conservative) based on their risk appetite and retirement timeline.

Comparison with other investments…

  • Managing a share portfolio or investment property requires active decision-making and expertise.

  • DIY investors may face higher risks due to lack of diversification or poor market timing.

5. Long-Term Growth

  • Superannuation is tailored for long-term growth through compound interest, benefiting from years of reinvested earnings.

  • Many super funds perform consistently well due to professional management and long-term strategies.

Comparison with other Investments…

  • Property and shares can also grow significantly over the long term, but they are subject to more direct market volatility and often require substantial upfront capital.

6. Estate Planning Benefits

  • Super can be passed to dependents in a tax-effective way, offering benefits for beneficiaries.

  • Many super accounts include life insurance and total and permanent disability (TPD) coverage.

Comparison with other investments…

  • The tax and estate implications for non-super investments can be more complex and less favorable.

7. Low Management Costs

  • Most efficient super funds, particularly those using ETFs or direct shares, have relatively low fees compared to actively managed funds or the costs associated with owning and maintaining property.

  • These days, transparent fee structures make it easier to understand the true cost of managing your superannuation.

Comparison with other investments…

  • Property involves ongoing costs (e.g., maintenance, rates, property management).

  • Share trading can incur brokerage fees, and actively managed funds often charge higher management fees.

8. Protection Against Bankruptcy

  • In most cases, superannuation is protected from creditors during bankruptcy, offering an extra layer of security for individuals in financial distress.

Comparison with other Investments…

  • Other assets, like property or shares, are generally not protected and can be liquidated by creditors.

Considerations and limitations of superannuation…

While super has significant benefits, there are also drawbacks when compared to other forms of investment:

  • Limited Accessibility: Funds are typically inaccessible until preservation age (usually 60+).

  • Investment Choice: Some retail or industry super funds offer fewer direct control options than personal investment portfolios.

  • Regulatory Risks: Superannuation policies and tax rules are subject to government changes, potentially affecting long-term strategies.

Conclusion

Superannuation is an effective, tax-efficient investment vehicle designed for retirement, offering unique benefits such as tax concessions, employer contributions, and long-term growth. However, its restricted access and reliance on regulatory frameworks make it less suitable for short- to medium-term financial goals compared to other investments like shares or property. A balanced financial strategy often includes both superannuation and other investments to maximize wealth-building opportunities and financial security.



EXPERIENCED FINANCIAL ADVICE.

Westmount Financial is a trusted, long-standing financial advisory firm based in Perth, specializing in optimizing superannuation funds and retirement strategies. We pride ourselves on taking the time to understand your unique financial profile, enabling us to design a tailored plan that helps you achieve your retirement goals with confidence.

With our guidance, you can look forward to a clear, well-defined path toward a happier, more fulfilling retirement lifestyle. Contact Westmount Financial today to schedule your initial consultation and take the first step toward securing your future.

Rick Maggi, Financial Advisor, Perth



FAQs

  • Superannuation is a type of savings plan designed to provide Australians with income for retirement. Employers contribute a percentage of your salary into a super fund, which is then invested to grow over time. Individuals can also make voluntary contributions to increase their retirement savings.

    Australians can access their super as a lump sum or through regular payments once they reach their “preservation age”. This is typically between the ages 55 and 60, depending on the year you were born, or when you reach age 65.

  • Australia's current superannuation guarantee rate is 11.5% of ordinary earnings (OE). This is the minimum amount employers must contribute to their employees' superannuation funds. The rate is scheduled to gradually increase, reaching 12% by 1 July 2025, ensuring Australians have enough funds to support their lifestyle during retirement.

  • Having multiple superannuation accounts can result in paying multiple sets of fees, which can reduce your overall retirement savings. It’s a good idea to consolidate your accounts into one to avoid unnecessary fees and simplify managing your super.

    An experienced financial advisor can help you consolidate your super accounts and determine the most cost-effective account that maximises your returns.

  • This will depend on the super fund you select. Superannuation funds are typically invested in a variety of asset classes, such as shares, property, bonds and cash. Each fund offers different investment options based on risk and return profiles.

    Depending on your risk tolerance and retirement goals, you can usually choose from conservative, balanced or growth portfolios. Working with a financial advisor ensures that your funds are invested in assets that align with your values and retirement goals.

  • Superannuation funds typically charge several fees, including administration fees, investment management fees and insurance premiums. Some funds may also charge performance fees if they exceed certain return benchmarks. Remember that these fees are deducted directly from your super balance, so review them regularly to ensure you’re not paying excessive fees that could impact your retirement savings.