Superannuation unattractive for moderate earners, says CA ANZ
The vast majority of low to moderate income earners are likely to access greater benefits and concessions by investing in the family home instead of superannuation, according to a technical expert.
CA ANZ superannuation leader Tony Negline says for most people earning 1.2 times average weekly earnings or below, superannuation doesn’t make that much sense, especially since the family home is excluded from the asset test for the age pension.
“Interestingly enough, I can be a home owner and live in a house that is worth any amount of money, anywhere from zero dollars to an unlimited amount of money and receive $34,500 [from the age pension] over a year, or I can be someone who has never earned much money and always lived in rented housing for whatever reason, and I can also receive $34,500 a year,” Mr Negline said.
“It’s one of the non sequiturs of the system that I’ve never understood.”
Speaking at an event hosted by Townsends Business & Corporate Lawyers, Mr Negline said if someone has $800,000, it could make more sense for them to buy a more expensive home since they’ll still be able to get a guaranteed income stream through the age pension.
“You can either have the money in a full tax-free environment both now and after death in the family home or you can put it into super. If you’ve gone above $1.6 million, it’ll then be taxed at 15 per cent, the capital [might] come out tax free [for any beneficiaries], but then any earnings will be taxable at 15 per cent in the event that they’re non-dependent adults and when they go to sell the assets, the fund is obviously going to pay capital gains tax on that,” he said.
For the vast majority of people who are moderately paid, to generate a lot of money in the super system is not easy, as it involves sacrifice for many individuals who have relatively simple means, he said.
"For moderate income earners, why wouldn’t they concentrate on their home? It’s got all the concessions,” Mr Negline said.
SMSF practitioners, Mr Negline said, should be considering all these issues as well at the Commonwealth Seniors Health Card when advising their clients on whether to take up the government's proposed $300,000 housing downsizing scheme.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.