So, I am a 57 year old male, one almost-not-dependant daughter and a financially independent partner. I worked overseas for 15 years from the age of 27-42 and so never started a super fund. In 1992 I left a salaried profession and entered the world of tech startups which I continue in today. As a result, I have no salary income and no employer to contribute to a super fund. I rely on sale of a business from time to time. I have put all spare cash into my primary residence as I see it as the most tax effective vehicle available. I have several investment properties overseas and generate enough income that I haven't had to skip a meal yet. My question is whether putting cash into a primary residence is always a better option than a super fund? I find super fund rules are complex and seem to change all the time...whereas cash into my primary residence is tax free and can be released when I retire and downsize which is the moment when I would want to draw down on any super anyway. Thoughts on a postcard please...

Hi Geoff,

Great question and dilemma a number of Australians go through.

Superannuation rules change all the time , however can be a great tax effective strategy as you get closer to retirement for a few reasons:
- Contributions into this environment are taxed at a maximum of 15% and no tax if the funds have already had this applied. Earnings are taxed at a maximum of 15% in accumulation phase.(Could be beneficial depending on your marginal tax rate.)
- Making extra contributions into your superannuation will also reduce your overall taxable position potentially based on your assessable income reducing.
- By selling down certain investments and placing the funds in super, you may reduce your tax position at the EOFY and as you head towards retirement.
- You have access to a number of investment options depending on how you invest just like you do outside super such as Cash, Fixed Interest/Term deposits, Property, Shares, Managed funds and alternative investments.
- This money will eventually be tax free to you if you retire and draw down from the benefits after the age of 60. Tax free income and tax free earnings.

Another point to consider is once you retire - holding multiple properties will still attract tax and ongoing upkeep and management. Do you really want that when you retire?

It's all about having a good balance of funds and diversifying your investments so as not to 'put all your eggs in one basket'.

Feel free to contact me on the below if you have any questions.

Thanks,

Ronald Pratap
Principal Financial Adviser
RP Wealth Management
Level 2, 351 Oran Park Drive, Oran Park 2570
T: 02 9188 1547 M: 0434 502 079
E: ronald.pratap@rpwealthmanagement.com.au
W: www.rpwealthmanagement.com.au
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Hi Geoff,

You are correct that you can sell your house tax free and therefore investing in your house can appear to be a tax free investment. Certainly nothing wrong with that.

What you need to remember is for you to have money to invest in your primary residence you will likely have had to pay tax on income or business sale to have the money to invest in your property in the first place. So an investment in your primary residence can (at worst case) be with income you have already paid 49% tax on.

Alternatively that money directed towards super could be done pre-tax. With tax levied on the super fund at 15% you are already 34% (49-15) better off before you even consider investment performance.

The other thing I’d encourage you to explore, especially if you are selling small businesses, are the concessions involving small business sale and super. You can save HUGE amounts of tax if this is all done correctly.

Summary is, don’t have all your eggs in one basket. Don’t have everything in super & don’t have everything in your house.

Please reach out if I can be of any further assistance.

Regards
James
03 9909 5800
james.wrigley@firstfinancial.com.au

Hi Geoff,

I would say the best thing you can do is find time to sit down with someone who can advise on the following:
business CGT concessions
tax planning
superannuation
investment management

so you need someone who does tax, investments, accounting, super, and understands that there is ALWAYS a trade-off when making decisions: eg, I can pay tax at my marginal rate today and use the money left over to reduce debt on my home, but this means I cant poke money into super and save tax, but use the cash in super to reduce debt later on.....

who on earth would have such a skill set????? i hear you ask????? start with a CA or CPA and find out what they know about the investment side of things......they generally have a pretty good idea, and/or have contacts to help you piece the puzzle together.

I know lots of people who have avoided super in favour of paying off the home. mostly they end up with a house, and not much else. IF that house can fund your retirement happy days, however if you dont have much left after you downsize, you are really up the proverbial creek in a barbed wire canoe with no paddle.......because you will not have time to do anything about it at that point.

get some advice from someone who knows what they are doing. A postcard response wont be doing you any service at all.....
cheers
BC