Money

Super timing is all important

Noel Whittaker
Noel Whittaker

AS usual, the papers are reporting a record number of super contributions made just prior to June 30.

It's certainly a good strategy to put money into superannuation if you are prepared to lose access to it till your preservation age, but you are not taking full advantage of the benefits of super if you leave it till the last minute.

There is no other investment vehicle that enables you to invest with pre-tax dollars and also to hold your money in an environment where income tax is just 15% and capital gains tax just 10% if the asset is held for over a year.  You are paying unnecessary tax if you hold money in interest bearing accounts in your own name for most of the year and then transfer it to super only at the last minute.

If you have spare cash, why wait till June 30 to move it to a low tax area?

Most of us find it easier to pay commitments by a series of monthly payments, rather than save up and make a payment in a large lump sum.  This is why it is customary to offer payments like health insurance on a quarterly or monthly basis.

This is why I recommend making your super contributions monthly if you can.  If you are investing in growth assets such as shares, you will be able to practice a proven strategy of dollar cost averaging.  Paying monthly will also free you from the burden of trying to accumulate a larger lump sum.

As always, take advice and don't exceed the contribution limits.  There are heavy penalties for those who do.

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:  noel whittaker opinion superannuation



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