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



Look My Way into ArtExpress

Ruby Sullivan of McAuley Catholic College has had her major HSC artwork accepted into the annual ArtExpress exhibition.

McAuley student's HSC artwork selected for exhibition

'That's not a brown!': Rare snake found lurking

Snakes have an inoffensive nature and are reluctance to bite

Spotify Summer tour kicks back in the Clarence Valley

David Harrison, Thom Moore and Beatrice McBride pose in the back of their truck for #spotifysummer

Head down to Minnie Water and Wooli to meet the crew from Spotify.

Local Partners

Dakota's world beating spectacular performance

Dancer helps break world record at School Spectacular performance


Kernaghan's a 'boy from the bush' with a timeless quality

Country music singer Lee Kernaghan.

Lee Kernaghan is celebrating the 25th year of his breakthrough song.

Ready to rumble: Boxing makes long-awaited return to Grafton

DETERMINED: Grafton Amateur Boxing Club members Zac Cotten (Cruiserweight), James Morrison (Jnr Featherweight), Eddie Debono (Super Heavyweight), Rhys Walters (Light Heavyweight), Joseph Pigg (Jnr Welterweight), Jamie Mansfield (Cruiserweight) are prearing for upcoming fight night in Grafton.

Five North Coast title belts up for grabs

Cyclist's 24 hours of pain for mental health

International endurance mountain-bike rider Morgan Pilley is used to pushing through the elements, but this weekend he'll push on to raise money for local mental health services in a charity ride at Junction Hill.

Ride For Youth to raise money for local youth mental health services

Justin Timberlake stuns students with secret class

Justin Timberlake stunned high school students in Sydney

Carrie Fisher says Ford will be bugged by affair confession

Carrie Fisher is sure Harrison Ford is annoyed at her

Dakota Fanning rekindles romance with childhood sweetheart

Dakota Fanning rekindles romance with ex

Jennifer Lawrence apologises to the people of Hawaii

Jennifer Lawrence sorry for 'offensive' story

Cruz Beckham's single a 'one-off'

He is not planning to launch a full-time music career yet.

Louis Tomlinson's mother dies aged 42

Louis Tomlinson's mother has died.

Five South Grafton houses that won't break the bank

Check out these South Grafton houses for sale

'Crucial' farm land eyed by defence department

Lawson Geddes moving the Brangus cattle to higher ground - which is the land the Defence Department is interested taking for the Shoalwater Bay expansion.

"You can't have one without the other.”

Former Shark Show for sale for $1.3 million

Vic Hislop at the old Shark Show.

TALK about a jaws-dropping real estate opportunity.

There's a whole lot of luxury in this home

The Endeavour Foundation's latest prize home in Mountain Creek.

WHEN it comes to desirable homes, it's hard to go past a prize home.

Give a little more this Christmas

TIME TO GIVE: Lee Johns, Courtney Smith and Daniel Kelly of Ray White Yamba promote their Little Ray Of Giving Christmas gift appeal.

Call out for presents, big or small

Ready to SELL your property?

Post Your Ad Here!