Money

Super to feature in next budget

Noel Whittaker
Noel Whittaker

If the budget leaks are to be believed, there will be further changes to superannuation in next Tuesday's federal budget. 

Unfortunately these continual changes weaken people's faith in the system ,and more and more people will start borrowing for investment instead of making additional salary sacrificed contributions to super.

Think about two people call Bill and Mary, aged 40 who want to put a wealth building program in place.  They decide they can spare $10,000 a year from their gross salary.  Bill decides to salary sacrifice $10,000 a year to super which means he will be investing $8500 a year after the 15% contribution tax has been deducted.  If his superannuation fund earns 9%, he will have an additional $793,000 in his superannuation fund at age 65. 

After taking advice, Mary chooses a different course and borrows $120,000 to invest in a quality share trust - the interest will be around $10,000 a year, tax deductible.   If the trust earns 8.5% per annum , when tax is taken into account, she will have $998,000 at age 65 - an extra $205,000. 

The reason for the difference is that Mary has got $120,000 working for her at age 40- it will be over 14 years before Bill has $120,000 working for him because he is only investing a net $8500 a year.  Also, because Mary is investing outside the superannuation system, she is not losing access to her money. 

Investing is like a game of Monopoly - the winner is the one who controls the most assets around the board.  Borrowing for investment is still the best way for people to create wealth because the interest is tax deductible and there is no tax on capital gains until the asset is disposed of.  This may be many years after they retire.  A further benefit is that the capital gains tax is payable on just half of any gain once the asset has been held for 12 months. 

Noel Whittaker is a co-founder of Whittaker Macnaught Pty Ltd.  His advice is general in nature and readers should seek their own professional advice before making any financial decisions.  His email is noelwhit@gmail.com

Topics:  federal budget 2012, fiscal policy, noel whittaker




Join the Community.

Get your local news, your way.

Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Miriam Vale man busted with boot loads of pot

BUSTED: Miriam Vale police have seized 28 mature cannabis plants, resulting in a 52-year-old man being charged with major drug offences. Miriam Vale police.

“These efforts to curb drug production are ongoing"

Bundy woman warns of fake Telstra scam

Jackie Radin is urging people to be aware of telephone scams, after being a victim herself   Picture: DERRICK DEN HOLLANDER scam050310-

Scammers call out of the blue

Latest deals and offers

Smashing Good Time

ARE YOU FRUSTRATED: Kylee Burridge is opening a business called Smashing Good Time in Barolin Street. Photo: Mike Knott / NewsMail

Kylee Burridge is opening a business called Smashing Good Time in Barolin...

Mother's Day

YOUNG VOLUNTEER: St Mary's student Molly Sellers admires the flowers at the Endeavour Foundation for Mother's Day. Photo: Mike Knott / NewsMail

St. Mary’s volunteers at the Endeavour Foundation to help pick flowers for Mother’s...

Do they Shape up or ship out?

DO THEY SHAPE UP: NewsMail's Crystal Jones asks some people what they think of the new Arnotts Shapes in comparison to the original ones.
Photo: Max Fleet / NewsMail

NewsMail's Crystal Jones asks some people what they think of the new Arnotts Shapes...

Demand for acreage lots pushes up property prices

Property values in Cooroy have increased 25%

Property values jump in Cooroy and Peachester.

How a sacked real estate agent made $725k in four months

Agent is now under investigation by the industry watchdog

RBA warns of future apartment oversupply

Toowoomba: Crest Apartments and Burke & Wills, Ruthven Street ( view from Neil Street) Photo Bev Lacey / The Chronicle

RBA says oversupply of apartments poses risk to household finances