Save with su­per

Townsville Bulletin - - Investor -

SU­PER­AN­NU­A­TION is the per­fect sav­ings and tax min­imi­sa­tion ve­hi­cle.

Noth­ing else of­fers you the abil­ity to in­vest with pre-tax dol­lars, en­joy tax on the earn­ings of 15 per cent and then make tax-free with­drawals once you reach 60.

It’s about the only tax break a PAYG em­ployee can get these days, and is ideal for any­body in busi­ness as its one of the few as­sets that can­not be touched if you go broke.

Sadly there are still a large num­ber of Aus­tralians who fail to un­der­stand that su­per­an­nu­a­tion is not an as­set like prop­erty or shares, but merely a struc­ture that owns those as­sets.

As a re­sult, when share mar­kets fall, su­per­an­nu­a­tion al­ways get the blame.

The re­sult of this mis­un­der­stand­ing is a gen­eral dis­trust of su­per which is not helped by some of the ridicu­lous state­ments that get air time.

The lat­est is a claim that within 15 years su­per­an­nu­a­tion funds may be forced to freeze as­sets and ban with­drawals, be­cause the re­tired baby boomers will be tak­ing out more than the rest of the work­force are con­tribut­ing.

This is clearly im­pos­si­ble. The su­per­an­nu­a­tion in­dus­try can only run out of money when there is no cash, prop­erty or shares left in the world. Re­mem­ber, it is merely a ve­hi­cle that owns them. The big prob­lem is that too many would-be in­vestors fo­cus on the il­log­i­cal scary snip­pets that make the head­lines, and con­se­quently never get to fo­cus on the real prob­lems. Think about this. Even though the su­per­an­nu­a­tion in­dus­try can never run out of money be­cause it is merely a re­cep­ta­cle for as­sets, gov­ern­ments are a dif­fer­ent an­i­mal en­tirely.

Un­able to cre­ate wealth of their own, they are merely con­duits that raise taxes and re­dis­tribute them.

Within 20 years the el­dest baby boomers will be in their mid-80s which is usu­ally when most of them will be think­ing about en­ter­ing aged care.

The big worry for them is that there will be in­suf­fi­cient places, and car­ers avail­able at the same time as aged pen­sions will be un­der pres­sure. That is the real cri­sis fac­ing this coun­try. Noel Whit­taker is a di­rec­tor 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 noel. whit­taker@ whit­tak­er­ma­c­naught. com. au.

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