Author Topic: Australian Super advice?  (Read 3271 times)

Mikaelus

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Australian Super advice?
« on: February 18, 2016, 03:48:07 PM »
I'm a noob who really struggles to understand technical tax related advice... just wondering if anyone can give me some advice about what I should be doing in regards to Super.

I live in Australia and have saved roughly 25x my yearly expenses, but I'm still working because I enjoy my job at the moment and would like to save a little more to give myself a larger safety margin.

While I'm working my employer is putting some of my pay into a Superannuation fund. What should I be doing with this?

I've got about $4000 in Super, I'm not even sure what fund it's with (I think it's Vision Super?), I've paid so little attention to this...

Can anyone give me advice as to what I should be doing in regards to Super?

Should I be contributing as much as I can to super? Nothing?

Any funds I should look at?

Do I have to set up a SMSF if I want to have low/no management fees and most/all of my money in an index fund? I'd rather not set one up, it seems super complicated?

If I start living off my stash, I could be putting 100% of the pay from my job into super. Would that be a good idea? It is all untaxed, right? But then I couldn't access it until, what, 65?

Planning to quit my job in a year or two and I'm just so confused about what I should be doing in regards to super and early retirement.

Can anyone offer some simple adive for a noob like me? 

deborah

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Re: Australian Super advice?
« Reply #1 on: February 18, 2016, 04:28:56 PM »
Most important question - how old are you?

nnls

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Re: Australian Super advice?
« Reply #2 on: February 18, 2016, 04:38:48 PM »


Should I be contributing as much as I can to super? Nothing?


If I start living off my stash, I could be putting 100% of the pay from my job into super. Would that be a good idea? It is all untaxed, right? But then I couldn't access it until, what, 65?


Its not untaxed. Employer contributions and pretax contributions are  taxed at 15%  and are limited to I think $30000 a year. Contributions after that are taxed.

Mikaelus

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Re: Australian Super advice?
« Reply #3 on: February 18, 2016, 07:10:30 PM »
Oh, of course... I'm 33.

Would love any advice people can offer.

urbanista

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Re: Australian Super advice?
« Reply #4 on: February 18, 2016, 07:23:45 PM »
You should never put 100% of salary into super unless you have other income.

What is your marginal tax rate? Assuming your marginal tax rate is > 15%, you should salary sacrifice extra into super so that total gross contributions amount to $30,000 (that's including employer's contributions).

SMSF are expensive until you have a large pool of money (at least $300,000) and some knowledge.

Find a low fee super fund with index funds option. For example, Australian Super is one of them. Just pick one of the "Pre-mixed" index funds according to your risk tolerance. Done.
« Last Edit: February 18, 2016, 07:25:20 PM by urbanista »

alsoknownasDean

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Re: Australian Super advice?
« Reply #5 on: February 18, 2016, 07:57:51 PM »
Yeah, essentially superannuation contributions end up being taxed at a lower rate (which is paid by the fund), but are locked away until your preservation age (60).

Have a look at the below link for some info on superannuation. :)

https://www.ato.gov.au/Individuals/Super/

If you've worked multiple jobs and haven't rolled over your super fund, you may have multiple superannuation accounts.

https://www.ato.gov.au/Individuals/Super/In-detail/Keeping-track/Check-your-super/

How did you only get $4000 in super when saving 25x expenses? Working outside Australia? Self-employed?

marty998

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Re: Australian Super advice?
« Reply #6 on: February 19, 2016, 05:16:50 AM »
Yeah read the ATO website Dean linked to.

Super is not an investment. It's a tax shelter. You get access to concessional tax rates in exchange for locking your money up for a very long time.

If you've only got a low balance in super (such as $4k) you need to be careful insurance premiums don't eat away at it. When you 'join' a fund... chances are you are automatically enrolled in their group insurance policy for Death, TPD and income protection (3 premiums for 3 different types of cover). The premium deductions can be quite large.


Mikaelus

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Re: Australian Super advice?
« Reply #7 on: February 21, 2016, 03:52:03 PM »
How did you only get $4000 in super when saving 25x expenses? Working outside Australia? Self-employed?

Yeah, it's a combination of working overseas and being self employed. I might have more than $4K, but that's what I had last I checked, and I wouldn't imagine it'd be more than that.

I just haven't been paying attention to Super.

If I've saved 25x expenses, is there a certain amount I should have in Super? 10x expenses? 5x expenses? Do I even need to have Super? What risk am I running if I had little/nothing in Super?

happy

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Re: Australian Super advice?
« Reply #8 on: February 21, 2016, 06:39:55 PM »
Firstly, don't ignore your super. Your employer is putting in 9.5% of your wage.  Since you are young, it will compound, so its not "nothing". Manage it properly. Get a low-cost super fund.

If you have 25x expenses you don't "need" anything in super per se if you trust  4% SWR…(its slightly lower 3.5% in Australia, but don't lets go down that rabbit hole.)  As others have said super is a tax structure….depending on your income its usually a tax shelter which is why people use it.  It also usually  allows you to buy life/disability type insurances at a lower tax rate and is also a liability shelter - as I understand it,  you can't be sued for your super ( not a lawyer, just what I've been told).

If you don't have any part in super you might be missing out on some tax breaks, but you need to do your oown math on this, it has different effects on different income levels.

Congrats on 25X at such a young age!

deborah

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Re: Australian Super advice?
« Reply #9 on: February 21, 2016, 06:49:55 PM »
Obviously, having 25x what you need, you should be able to retire tomorrow. I was in a similar position, but had not really put my savings in the right places to earn enough to retire. But, once/if you have them there, then why not?

Super is just a tax advantaged vehicle for almost any type of investment. As a result, you can reach your nest egg goals faster with it. You can put money into super after you are retired until you are 65, and can use it to reduce your tax (claim it as a pre-tax contribution) and to build money more quickly because of the tax breaks. Once you start to take money out of super by putting some or all of it into pension phase, the amount that is in pension phase must be withdrawn at a certain rate, depending upon your age. You can currently put $180,000 (I think) a year into super AFTER tax, as well as about $30,000 before tax (you can check the figures).

You are running no risks if you have nothing in super - just missing out on the tax breaks if you are on an average or more income. If you are on a low income, you might be better off. When you sell stuff in pension phase in super, it doesn't get CGT, but that may change. And the income you get from super in pension phase is not taxed (but that might change too).

Since these things are due to change in May, and you are self employed (so your boss doesn't put in the 9.5%) I would put some amount into super prior to that this year (perhaps the highest amount you can pre-tax, from what you pay yourself), in case they grandfather the contributions made before any changes. After that, I would review the changes, and see if they make any sense to your situation.

limeandpepper

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Re: Australian Super advice?
« Reply #10 on: February 21, 2016, 07:32:17 PM »
If you already have enough for retirement, then super is a nice bonus for your later years.

As has been said, with such a low balance in your super, keep an eye out for premium deductions.

Also, check if you are eligible for super co-contribution. If you are a low enough earner to be eligible, you may decide it is worth contributing to super to get the co-contributions.

I remember you starting a thread a couple years back - would love to get an update on your lifestyle and situation now if you want to share! Are you semi-retired now? Are your expenses still as low as they were back then and are you still staying in that place with the crazy cheap rent?

JLR

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Re: Australian Super advice?
« Reply #11 on: February 22, 2016, 05:23:33 AM »
Have you only just moved to Australia? Had a windfall? Cash in hand work?

I'm curious about how you have 25x your expenses saved, but only $4k in super.

Adram

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Re: Australian Super advice?
« Reply #12 on: February 23, 2016, 05:48:21 AM »
If you quit working and your income from stash (& expenses, obviously) is under approx $22k - which is the level at which you start paying tax at 19% on anything above that, putting the excess stash into super could be a good idea, depending on circumstances.

Since you are only 33, and the difference in tax rate is only 4% (plus Medicare of 2%, depending on how high your income actually is, and family situation, putting funds into super now may not be a great idea.

Bear in mind that you can make non-concessional (after tax) contributions at any age up to 65 if not working, so you don't have to decide now. If the stash gets bigger later, and it becomes more beneficial tax wise, and there's less time to wait to access it, you can dump big amounts in then. You could use the 3 year bring forward rule the day you turn 60 to dump in $540k, then draw tax free after that.

However the longer you leave it, the more capital gain you might pay to switch across.