Maximising your super

Noel Whittaker

RECENTLY I received a question from a reader which is highly relevant to anyone who is trying to maximise their returns from superannuation.  The question read:  “Can you please give us some general information about DIY superannuation including ways to set it up and the costs.

We are 63 yrs and retiring in 2 years, and only have $68,000 in a Super Term Deposit  earning 4.90%. This matures soon.  We thought if we were to put it into a DIY Super term deposit we might be able to earn more  as there are rates  at the moment  around 6.50%.  My husband is working and earns $52,000 pa.   I earn around $8,000.”

It’s a simple matter to start your own super fund and any accountant or financial advisor would be able to refer you to a firm that specialises in handling the paperwork such as preparation of the Trust Deed.  Usually the costs to run your own fund are around $3,000 a year so you would need to have at least $200,000 to make it viable. 

Of course, when you start your own fund you still have to make a decision about investing directly or whether you opt for managed funds and let the experts make the decisions.  If you prefer the second option it may be simpler to just use one of the master trusts that will almost certainly be offered by your advisor.  Most master trusts include term deposits so it is possible to stay in the superannuation area and still access some of the high interest rates that are currently around.

The questioner can certainly benefit by salary sacrificing part of his income to super and the spouse could pick up a free $1,000 a year from the government by making a non concessional contribution to super and then claiming a co-contribution. 

However, the main purpose of superannuation is to save tax, and when they retire, they may find that holding the money outside super will be more tax effective than holding it inside super.  This is because of the Senior Australian Tax Offset which allows a couple of pensionable age to earn $26,680 a year each and pay no tax.  As always, ongoing advice is crucial. 

Noel Whittakeris a director 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 noel.whittaker@whittakermacnaught.com.au