Money

Super to feature in next budget

Noel Whittaker
Noel Whittaker

If the budget leaks are to be believed, there will be further changes to superannuation in next Tuesday's federal budget. 

Unfortunately these continual changes weaken people's faith in the system ,and more and more people will start borrowing for investment instead of making additional salary sacrificed contributions to super.

Think about two people call Bill and Mary, aged 40 who want to put a wealth building program in place.  They decide they can spare $10,000 a year from their gross salary.  Bill decides to salary sacrifice $10,000 a year to super which means he will be investing $8500 a year after the 15% contribution tax has been deducted.  If his superannuation fund earns 9%, he will have an additional $793,000 in his superannuation fund at age 65. 

After taking advice, Mary chooses a different course and borrows $120,000 to invest in a quality share trust - the interest will be around $10,000 a year, tax deductible.   If the trust earns 8.5% per annum , when tax is taken into account, she will have $998,000 at age 65 - an extra $205,000. 

The reason for the difference is that Mary has got $120,000 working for her at age 40- it will be over 14 years before Bill has $120,000 working for him because he is only investing a net $8500 a year.  Also, because Mary is investing outside the superannuation system, she is not losing access to her money. 

Investing is like a game of Monopoly - the winner is the one who controls the most assets around the board.  Borrowing for investment is still the best way for people to create wealth because the interest is tax deductible and there is no tax on capital gains until the asset is disposed of.  This may be many years after they retire.  A further benefit is that the capital gains tax is payable on just half of any gain once the asset has been held for 12 months. 

Noel Whittaker is a co-founder 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 noelwhit@gmail.com

Topics:  federal budget 2012 fiscal policy noel whittaker


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Patients inside as ambulance hit on highway

Queensland Ambulance Service transported a 60-year-old man from Septimus

Three paramedics among the injured

James Hardie boss devastated by work death

Construction firms have faced challenges from rising costs and small margins, but there's absolutely no indication that the coming year will be any worse than the past couple, MBA's Will Wilson says.

A MAN in his 60s has died in an industrial accident.

Highway in lockdown after crash kills three people

The scene of the crash about 30km south of Boggabilla in which three people died this morning.

Police appeal for witnesses to triple-fatal highway crash

Local Partners

Pauline Hanson's plane story contradicted by leaked tapes

A SECRET recording has captured Pauline Hanson indicating a plane at the centre of an AEC investigation was donated by a Victorian developer.

What to expect at Birds of Tokyo's Ipswich gig

The band will perform at the Racehorse Hotel on Friday.

BAND member Glen Sarangapany talks music, pub grub and doing shoeys

What public holidays are left in 2017

Ipswich residents will get the day off tomorrow for the show.

IPSWICH residents will get tomorrow off for the show

Caitlyn comes home to launch debut album

Gympie's Caitlyn Shadbolt will launch here debut album Songs On My Sleeve at an exclusive all-ages concert in Gympie on Friday, May 26.

Win tickets to Caitlyn's album launch

Sam Armytage and Tom Cruise? Saaaaay what?

SAMANTHA Armytage has hit back at rumours she’s dating Tom Cruise, following reports the pair had hit it off during an interview on Sunrise.

Musical tribute to flood volunteers released

Songwriter honours flood volunteers who helped their neighbours.

Lismore songwriter Simon Thomas was moved by strangers' kindness

Karl Stefanovic's rant about Schapelle Corby 'a bit rich'

Karl Stefanovic is sick of hearing about Schapelle Corby.

Maybe he just wanted to make himself the story.

Could Schapelle be heading for Gladstone?

Australian Schapelle Corby is escorted by Bali Police at the parole office in Denpasar, Bali, Indonesia, 27 May 2017.

Schapelle's mother teases her free daughter could be Gladstone bound

Six things you never knew about Men in Black

Mushu the pug

It's been 20 years since Men in Black first hit cinemas

10 strange stories behind famous sex scenes

Khaleesi and Khal Drogo in a steamy moment.

Every set has their own way of filming sex scenes

HBO spills new details on Game of Thrones’ final season

Game of Thrones’ eighth and final season will only have six episodes.

New details about what to expect from the eighth, final instalment.

New $46.7m counter-terrorism facility to be built in Wacol

Premier Annastacia Palaszczuk, pictured with Police Commisioner Ian Stewart, has announced plans to build a new counter-terrorism facility in Wacol.

The facility will be built over three years.

Home to a sex worker: Sordid history of iconic Coast shed

Milojevic Djordjevic's daughter Linda at the derelict shed on Yandina-Coolum Road.

The shed was once a liveable 'barrack'.

This is real estate's billion-dollar man

Bob Wolff at AREC with John McGrath of McGrath Real Estate.

They don’t call him the “Billion dollar man” for nothing

Man's amazing comeback from monster crisis

Pat O'Driscoll agents Penny Keating and Doug Webber sold 56 Agnes St, The Range at auction over the weekend.

NOT long ago, he sold his possessions to pay staff. Now he's back.

Report reveals progress on $319m airport upgrade

Aerials of the Sunshine Coast.Jetstar plane in front of the Susnhine Coast terminal, Sunshine Coast Airport.

Over two dozen government approvals needed for airport expansion

Ready to SELL your property?

Post Your Ad Here!