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Hi
I am 57 with a split of assets in and out of super. The investments outside super are mostly in my wifes name as she does not work and with franking etc pays no tax, in fact gets a refund each year.
It seems pointless putting these assets into super as the 15% tax will kick in plus the threat of future govt decisions over super is always a disincentive for me.
It seems absolutely everybody is sold on maximising super but my scepticism tells me to have interests split in and out of super.
Any thoughts on this strategy?
A: Thanks for the question.
I am not sure I share your concerns about the super system and future government changes. While I understand the sentiment, the reality is that the changes to super since 2007 have been relatively minor, and while there is a lot of “noise”, both parties are committed to the current system. The current government’s policy is “no unexpected detrimental changes” to the super system, and so far, they have lived up to that promise.
Depending on your wife’s income, she will in most cases be better off having money inside the super system than outside. The first $18,200 of personal income is tax free, however, the next marginal dollar of income will be taxed in 2014/15 at 21.0% (19% tax rate, plus medicare 1.5% plus disability insurance levy of 0.5%). Why pay a tax rate of 21% - when she will only pay 15% tax in super?
Furthermore, if she is 55 or over and then commences a transition to retirement pension, the effective tax rate on her super account balance will fall to 0%.
Sorry – I can’t see any financial argument to keep money outside super (other than an amount that will earn investment income to fully utilise the tax free threshold of $18,200).
