Superannuation is one of the best things about Australia's retirement system. Both capital gains and passive income are taxed at a lower rate within superannuation compared to outside of superannuation for a full-time worker.
Tax changes announced earlier this year have made non-superannuation investments less attractive – capital gains are going to be taxed more, negative gearing's appeal is being reduced, and trust distributions are under the spotlight.
With the lower tax rate during the accumulation phase and potentially a 0% tax rate in the retirement phase of superannuation (depending on the balance), it's a very effective investment vehicle for people saving towards retirement and in retirement too.
Tax makes a big difference for passive income because it's the after-tax income figure that investors can use.
Every household has a different tax position, so I'm not going to refer to tax for the rest of this article. Let's talk about dividend yields.

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The power of a dividend yield
Every investment that pays dividends comes with a dividend yield.
A dividend yield tells us how much passive income an investment pays.
The dividend yield is influenced by two factors.
First, there's the dividend payout ratio – how much of a business' profit is paid out as a dividend. Obviously, the more they pay out, the bigger the dividend yield.
The other factor is the valuation of the investment, which can often be measured by the price-earnings ratio (P/E) ratio. The more expensive an investment goes, the lower the dividend yield.
Investors can then look at the different dividend yields and decide what investments to choose. Higher dividend yields aren't necessarily better, but they do mean an investor can receive more passive income for the same portfolio balance.
For example, someone with a $200,000 investment balance at a 3% dividend yield would have $6,000 in annual passive income. If that same person were invested in investments with a 5% dividend yield, it would be $10,000 of annual passive income. That's 66% more income!
Generate $10,000 of monthly passive income from superannuation
To target $10,000 per month of income, we're talking about an annual goal of $120,000. That's a big goal, and would certainly unlock a pleasing retirement for whoever is receiving that level of money.
Targeting $120,000 of annual passive income would require a sizeable portfolio. The actual size depends on the dividend yield.
If the dividend yield was 3%, it would require a portfolio worth $4 million.
If the dividend yield was 5%, it would require a portfolio worth $2.4 million.
If the dividend yield was 7%, it would require a portfolio worth $1.71 million.
If I were looking to invest for a 3% dividend yield, I'd think about ideas like Washington H. Soul Pattinson and Co Ltd (ASX: SOL), Wesfarmers Ltd (ASX: WES), Lovisa Holdings Ltd (ASX: LOV), and Vanguard Australian Shares Index ETF (ASX: VAS).
Investments with a dividend yield of around 5% that I'm a fan of include L1 Long Short Fund Ltd (ASX: LSF), APA Group (ASX: APA), and Coles Group Ltd (ASX: COL).
Finally, potential investments with a 7% dividend yield I'd consider for high dividend yields in superannuation include MFF Capital Investments Ltd (ASX: MFF), WCM Global Growth Ltd (ASX: WQG), Future Generation Global Ltd (ASX: FGG), Telstra Group Ltd (ASX: TLS), and Medibank Private Ltd (ASX: MPL).
Overall, there are some great investments to consider, and I've filled my portfolio with a mix of the above ASX shares, each with different dividend yields.