Superannuation Is Not An Investment, It’s A Tax Structure


Many people assume that superannuation itself is an investment and during the recent economic downturn the media often reported negatively on superannuation.

You may have read terms such as ‘bad investment’ or ‘superannuation had lost billions’. In fact, superannuation itself is simply a tax-effective structure that sits around any ordinary investment, designed that way to facilitate saving for your retirement.

What does this mean?

Within your superannuation you may invest in a fund, direct shares, or even own a property or artwork. These investments would be the same whether they were within your superannuation fund or not.

What is different is the way the Australian Taxation Office treats them.

Superannuation is not an investment, it’s a tax structure.

All money contributed into your superannuation fund is taxed only at 15 per cent and earnings on your investments are also taxed only at 15 per cent. If the same investments were held outside of superannuation, the earnings would be taxed at your marginal tax rate. This could be as high as 46.5 per cent.

Of course, the other difference between your investments held inside of superannuation and your investments held outside is that there are restrictions on when you can sell-down your superannuation investments and withdraw the money as cash. You need to meet a condition of release, which are the nominated events that you must satisfy to withdraw your benefits from your superannuation fund. Normally this would be retirement. Until that point your money is still accumulating within the superannuation tax structure in whatever investments you have selected.

Need some help with your superannuation? Our Financial Coaches LOVE this stuff. To chat with one of the WE team, book in a time for a Free Strategy Session.


Disclaimer: Information contained within this article is of a general nature. Do not be rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.