With the Federal Election now in the rear-view mirror and the domestic equities landscape looking a little brighter, it’s time to talk about everyone’s favourite topic – superannuation.
The Aussie super system is one of the leading self-funded retirement systems in the world (despite some flaws) and remains a great option for those looking to invest in themselves and their future by making self-contributions to their super accounts.
What’s so good about super?
The Aussie super system, as it stands, is one of the best tax-advantaged accounts for the average Australian to invest in their super.
Australians are currently able to access their super at the age of 55 and the preservation age remains 67, with a fair likelihood that this will trend upwards as our ageing population places a burden on the current healthcare system.
At present, contributions are taxed at 15%, which is well below the lowest Australian income tax level of 18% for every dollar earned between $18,200 – $37,000 per year. This means the tax advantage of the super system is a real advantage for those seeking a higher average after-tax return on investment.
Is investing in super for me?
On the whole, dividend-loving Fools would be happy to see that franking credits are set to remain untouched, with retirees in particular to benefit from the tax benefits on offer in the Aussie dividend imputation system.
Superannuation is no exception, with the obvious downside that changes to the preservation and/or access age, as well as any taxation changes on your superannuation nest-egg, leave the future value of that investment subject to uncertainty.
Regulatory risk aside, the Aussie super system remains a solid option for those willing to accept the opportunity cost of locking that money away and letting compound returns work their magic.
With the Liberal Party being returned to power without much of a clear mandate, I would suggest the current landscape is unlikely to change in the immediate term given more pressing policy issues such as a national energy policy, which could make the likes of AGL Energy Limited (ASX: AGL) worth a look.
While any personal finance matters are by their very nature individual to everyone’s circumstances, I think the post-election outlook is bright for Aussie equities and the superannuation system more generally, which could mean it’s time to do your research and invest in a tax-sheltered vehicle to boost after-tax returns.
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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.