Understanding super is becoming more important

Reflecting on the 22 Federal budget as a tax accountant in public practice with a growing self managed super fund client base, something really struck me more so than it has done in the past. The thing that struck me was this: As time goes on, if you are an Australian tax resident and you don’t understand how Super can be used to benefit you and the various individual members of your family group, you will (likely) be placed at a material financial disadvantage versus people and family groups who get it.

To go back to the very start of superannuation, it was set up primarily as a tax privileged retirement savings system. What we’re seeing with this constant tweaking and fiddling of the super rules is that superannuation is becoming a vehicle which the federal government is using to achieve various policy and equity objectives – some of which have nothing to do with retirement savings.

Housing, women & ageing are 3 areas where actual or proposed super rules are targeted to achieve specific non-retirement goals. True, it could be argued that the purchase of your first house (for example) is a key step toward securing a person’s retirement. However it’s highly unlikely that the first home a person buys will be the residence they live out their retirement years in. This is just one example of where the $50K first home super saver scheme can be used by a smart family group to give their kids a leg up into their first investment property. It’s highly likely that wealthier, better advised and more investment aware families will use this to their advantage.

Another obvious one which has recently been changed to be even more concessional, is the downsizer contribution. Again, generally wealthier families can use this to stuff another $600k into their Christmas stocking regardless of the other limits and thresholds which may apply to their super balances. Again, there are policy arguments in support of this position; getting oldies/”empty nesters” out of bigger family homes frees up supply of larger houses in urban centres and cities for younger growing families.

Regardless of the merits of that underlying policy, combining the first home super scheme and the downsizer contribution in the same family group, we can see how well informed and financially savvy family groups can significantly increase their tax efficiency with an understanding of the super basics and a wolf pack mentality to investment. This intergenerational mentality is very rare but is becoming more and more important as time and super rule complexity grows.

Key to exploiting super is understanding it. Key to understanding it, is engaging with a superannuation accountant who takes a step back and seeks to understand the broader view of your family group and how the various members of the family can benefit from the complex rules at play.

Call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your super and family group situation.