Employees in Australia generally have a super fund where part of their salary is saved until retirement. Simply put, it is a way of saving for retirement in a tax-effective way. Contributions are generally placed in your superannuation account or accounts, with each one having a unique superannuation product identification number (SPIN).
Your superannuation contributions are invested into assets, while your balance is drawn down upon retirement. But what are the exact benefits of having superannuation? Why is it important, and what does it benefit?
The Importance of Superannuation
Superannuation is important because it creates an incentive program for individuals. It accumulates wealth intended to support you after retirement. While it’s clear that it benefits the super fund owner, superannuation also benefits the economy since it reduces the pressures of government-funded pensions.
The Incentives of Superannuation
There are numerous benefits and incentives to having superannuation. Some of them are the following:
You have the ability to reduce personal income tax by making deductible contributions to your superannuation.
You are guaranteed that all earnings received from assets are taxed at 15 per cent maximum.
You have a means of forced savings set aside for your retirement.
You have the ability to draw tax-free income in retirement.
You have a way to save and invest compulsory employer contributions.
Why Superannuation Was Created
Saving for retirement isn’t on everybody’s list, and it is often the least priority out of other concerns. Most Australians only think about saving several years before retirement. Most employees also don’t think about funding their retirement until they only have a couple of years to save, even when individuals have the right to contribute to their superannuation funds sooner.
The government provided several incentives and support so employees would set money aside and help save the economy. If not for these incentives, a higher proportion of the country would depend on the government pension, putting a strain on the government budget and overall economy.
With more people reaching the average retirement age, superannuation becomes more important. It’s best to stop relying on social security benefits and begin self-funding for retirement.
Things to Consider When Investing in Superannuation
There are a lot of tax benefits linked to investing in superannuation. However, there are also important things to keep tabs on. For instance, your contributions to your superannuation can only be accessed if the conditions for release are met. You also have limited asset types to invest in, depending on superannuation legislation and approved investments for your super fund.
If you have a self-managed superannuation fund (SMSF), you need to ensure that all investments follow the Investment Strategy. Moreover, you may also not be eligible for contributing to superannuation once you are over 65 without having the Superannuation Work Test.
Superannuation is a beneficial fund that you can invest in different assets of your choosing and use after retirement. It ensures that you have money to spend when you are no longer working as an employee and have enough funds to invest, do your hobby, travel or go on holidays. It benefits both you and the economy and ensures that you have a pension to rely on in the future.
Swell Financial Planning provides financial services and advice on investment, insurance, budgeting, cash flow, superannuation and more. We are a Gold Coast-based firm servicing clients locally and around Australia. We tailor solutions to every client’s needs and are committed to helping them achieve their dreams.
If you are looking for an asset management firm on the Gold Coast to provide you with sound financial advice, Swell Financial Planning is the law firm to go to! Get in touch with us today and let us know how we can help!