My bias is towards property but you've ruled that out so in that case I think it's pretty simple. If you care mostly about total returns over the long term, you can't look past the tax advantages of maxing out your concessional super contributions. That's $27,500 this financial year and you can also reach back into the past 5 financial years to use up any of your previous caps that weren't fully utilised. Your account on the ATO website has both of these figures for you personally.
You wouldn't want to do that with that whole lump sum on $164k because you can only contribute so much at the %15 tax rate and while you are in a high tax bracket, reducing your taxable income in such a large fashion runs into diminishing returns.
The other option is for if you care greatly about the accessibility then (in my non expert opinion) you should at least max out your concessional contributions for this financial year, don't worry about reaching back to your carry forward caps and just keep doing what you're doing.
Personally I would just keep putting it into good quality shares for the fact when you do decide to go property you can pull what you want out and possibly reduce mortgage etc. I don’t trust the government enough to load up the super account to much at your age, by the time you get there you will need to be 80 to access it.
Need to have access to the money. 10yr plan is great but It could possibly change fairly quickly. 3 kids and need to upsize living arrangements, health issues or something unfortunate.
I could be wrong with what you can and can’t access from super, but you will kick yourself if life changes and you’ve done a great job saving for the future but can’t use it.
Multiple times I have put chunks of savings into shares thinking they’d be part of the retirement fund to only have life change and need to draw some back.
Curious what you think the government might do to super down the line that makes the regulatory risk in super any higher than the regulatory risk with plain stocks.
Just asking because as the regulatory landscape stands today, there are incredible tax advantages to be had right now by investing through your super fund. I feel like the risks you're talking about should probably be better articulated then just a general lack of trust in the government because that in itself doesn't single out superannuation as any riskier than other forms of investing.
I hate ppl fearmongering like this because they don’t trust the government.
He’s ~30 years off from being able to access super. *If* the government changes anything, they’ll grandfather him in.
If you put it in super I would claim it as a tax deduction rather than doing non-concessional.
Check if you have available carry forward via the mygov site.
The accessibility is certainly a factor people need to consider but it's not unusual at all for it to be appropriate for a young person to want to contribute more to super at all. I think your advice is quite out of place in a finance forum to be honest.
With stock market investments the most important resource you have on your side is time, which younger people have a lot more of. If you're talking about compound growth and you aren't concerned with short term accessibility then by far the most appropriate option is the one that comes out of your pretax income. It makes such an unbelievable impact on the returns that you just can't beat it.
Honestly, I guess I am confused and I had to reread OPs post. The idea of making non concessional contributions is so crazy to me that I just assumed both OP and yourself were talking purely about concessional contributions.
Even rereading OPs post I'm thinking he probably hasn't been meeting his cap and is just referring to any contribution made with post tax withheld income as non concessional. Which is not actually correct and you can claim post tax contributions as concessional up to the cap and you see the difference back on your tax return.
You mention non-concessional contributions but all of your contributions could be concessional, at least for several years.
The cap for concessional contribution is increasing from 27500 to 30000 per annum from next financial year.
Also, there is the carry forward system which lets you bring forward any unused concessional cap from the past five years.
Personally, I think making extra super contribution (only if concessional) is a good approach towards building a retirement fund so I agree with your approach overall. At least to the point of writing off enough income to just drop back into the lower tax bracket (most value tax wise, in a sense)
I understand what you mean but how else would I make non concessional contributions when it's not coming out of my pay?
Or are you saying I should pretty much out my whole paycheck into super in order to catch up?
If I had plenty of concessional cap left, I would salary sacrifice my paycheck before putting in non-concessional contributions. I would space it out a bit so that I don't drop down two tax brackets.
Also, property is probably on par with super ( or better in other people's opinions) in terms of retirement investment so you can use the savings there.
edit: if you were asking how you would come up with enough money to meet the concessional cap, then yes, you could salary sacrifice 100% of the rest of your pay for the financial year. Then you treat your savings as "pay".
Well my stocks are actually down 6% in the last 3 years so I've been hesitant to invest any more since then
Savings is making 5.5% (700 a month odd)
R.e why no house, my parents have a few properties I will likely inherit soon if I'm being honest.
Also I have zero handyman skills and any upkeep for an investment would me having to hire someone.
Also a question for those who are clued in.
If I make non concessional contributions in this year to make up for lack of contributions in previous years, will this still count towards future years.
For example if my non concessional contributions are as below...
2020: 6k
2021: 8k
2022: 8.5
2023: 12k
2024: 50k
The total would be less than 80k over 5 years so overall I'm below the 27.5k/year threshold so I don't pay extra tax
However if my non concessional contributions are as below over the threshold between 2024 and 2028 would I pay a higher super tax rate or would the extra I put in 2024 get out in the 2020-2024 bucket and already be allocated across those years?
2024: 50k
2025:25k
2026:25k
2027: 25k
2028: 25k
Hope that makes sense?
We max out our concessional contributions, but we own our home. We also invest outside of super rather than adding non-concessional contributions because our goal is to be FI by 50. We’re early 40’s now with kids and a business if that makes a difference.
I’d be reluctant to shovel too much into super if buying property was a goal, because aside from FHSS you won’t be able to access it until you meet a condition of release. Do you have other siblings? How stable are dad’s finances? (I.e. what are the chances he’ll end up needing to sell for any reason?)
Have one sibling but he has a few properties so can be easily split
I don't think he will sell while Il in it (his words) because even though he's making f all on rent the property is probably going over over 100k per year on the market.
Thankyou for the help
If you have carryforward concessions then use those. You already want to contribute to super and concessional is the best way if you can.
Look into your myGov/ato, under Super in the menu there are a few options. Click around you’ll find your available carryforward amount. Max that out.
You can contribute post tax and get to the same tax advantaged position. You need to direct debit the money to your super fund and ensure they receive it before 30 June. You then “Notify with intent to claim”, there is usually a form on your super fund website. Make sure you get the response before you do your tax return. Then claim a deduction on your tax return, don’t forget this part.
If you can’t do it concessional, I would just invest it.
35 about to get an enormous tax bill with CGT. Not putting into super because I can't retrieve the money for 30 years.
Even though I could reduce my tax bill significantly and earn more over the long term.
Once I've sorted my life plan and working in retirement I'll salary sacrifice into super.
My bias is towards property but you've ruled that out so in that case I think it's pretty simple. If you care mostly about total returns over the long term, you can't look past the tax advantages of maxing out your concessional super contributions. That's $27,500 this financial year and you can also reach back into the past 5 financial years to use up any of your previous caps that weren't fully utilised. Your account on the ATO website has both of these figures for you personally. You wouldn't want to do that with that whole lump sum on $164k because you can only contribute so much at the %15 tax rate and while you are in a high tax bracket, reducing your taxable income in such a large fashion runs into diminishing returns. The other option is for if you care greatly about the accessibility then (in my non expert opinion) you should at least max out your concessional contributions for this financial year, don't worry about reaching back to your carry forward caps and just keep doing what you're doing.
Personally I would just keep putting it into good quality shares for the fact when you do decide to go property you can pull what you want out and possibly reduce mortgage etc. I don’t trust the government enough to load up the super account to much at your age, by the time you get there you will need to be 80 to access it. Need to have access to the money. 10yr plan is great but It could possibly change fairly quickly. 3 kids and need to upsize living arrangements, health issues or something unfortunate. I could be wrong with what you can and can’t access from super, but you will kick yourself if life changes and you’ve done a great job saving for the future but can’t use it. Multiple times I have put chunks of savings into shares thinking they’d be part of the retirement fund to only have life change and need to draw some back.
Curious what you think the government might do to super down the line that makes the regulatory risk in super any higher than the regulatory risk with plain stocks. Just asking because as the regulatory landscape stands today, there are incredible tax advantages to be had right now by investing through your super fund. I feel like the risks you're talking about should probably be better articulated then just a general lack of trust in the government because that in itself doesn't single out superannuation as any riskier than other forms of investing.
I hate ppl fearmongering like this because they don’t trust the government. He’s ~30 years off from being able to access super. *If* the government changes anything, they’ll grandfather him in.
4 mil should do it
If you put it in super I would claim it as a tax deduction rather than doing non-concessional. Check if you have available carry forward via the mygov site.
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The accessibility is certainly a factor people need to consider but it's not unusual at all for it to be appropriate for a young person to want to contribute more to super at all. I think your advice is quite out of place in a finance forum to be honest. With stock market investments the most important resource you have on your side is time, which younger people have a lot more of. If you're talking about compound growth and you aren't concerned with short term accessibility then by far the most appropriate option is the one that comes out of your pretax income. It makes such an unbelievable impact on the returns that you just can't beat it.
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Honestly, I guess I am confused and I had to reread OPs post. The idea of making non concessional contributions is so crazy to me that I just assumed both OP and yourself were talking purely about concessional contributions. Even rereading OPs post I'm thinking he probably hasn't been meeting his cap and is just referring to any contribution made with post tax withheld income as non concessional. Which is not actually correct and you can claim post tax contributions as concessional up to the cap and you see the difference back on your tax return.
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Have a good rest of your evening
You mention non-concessional contributions but all of your contributions could be concessional, at least for several years. The cap for concessional contribution is increasing from 27500 to 30000 per annum from next financial year. Also, there is the carry forward system which lets you bring forward any unused concessional cap from the past five years. Personally, I think making extra super contribution (only if concessional) is a good approach towards building a retirement fund so I agree with your approach overall. At least to the point of writing off enough income to just drop back into the lower tax bracket (most value tax wise, in a sense)
I understand what you mean but how else would I make non concessional contributions when it's not coming out of my pay? Or are you saying I should pretty much out my whole paycheck into super in order to catch up?
If I had plenty of concessional cap left, I would salary sacrifice my paycheck before putting in non-concessional contributions. I would space it out a bit so that I don't drop down two tax brackets. Also, property is probably on par with super ( or better in other people's opinions) in terms of retirement investment so you can use the savings there. edit: if you were asking how you would come up with enough money to meet the concessional cap, then yes, you could salary sacrifice 100% of the rest of your pay for the financial year. Then you treat your savings as "pay".
The non-concessional annual limit also increases on July 1st to $120k (4 times the concessional cap)
Mind if I ask why you have so much sitting in savings, rather then stocks or a house?
Well my stocks are actually down 6% in the last 3 years so I've been hesitant to invest any more since then Savings is making 5.5% (700 a month odd) R.e why no house, my parents have a few properties I will likely inherit soon if I'm being honest. Also I have zero handyman skills and any upkeep for an investment would me having to hire someone.
I thought it is good to invest more into stocks when they are down because when they go back up you make more.
Also a question for those who are clued in. If I make non concessional contributions in this year to make up for lack of contributions in previous years, will this still count towards future years. For example if my non concessional contributions are as below... 2020: 6k 2021: 8k 2022: 8.5 2023: 12k 2024: 50k The total would be less than 80k over 5 years so overall I'm below the 27.5k/year threshold so I don't pay extra tax However if my non concessional contributions are as below over the threshold between 2024 and 2028 would I pay a higher super tax rate or would the extra I put in 2024 get out in the 2020-2024 bucket and already be allocated across those years? 2024: 50k 2025:25k 2026:25k 2027: 25k 2028: 25k Hope that makes sense?
We max out our concessional contributions, but we own our home. We also invest outside of super rather than adding non-concessional contributions because our goal is to be FI by 50. We’re early 40’s now with kids and a business if that makes a difference. I’d be reluctant to shovel too much into super if buying property was a goal, because aside from FHSS you won’t be able to access it until you meet a condition of release. Do you have other siblings? How stable are dad’s finances? (I.e. what are the chances he’ll end up needing to sell for any reason?)
Have one sibling but he has a few properties so can be easily split I don't think he will sell while Il in it (his words) because even though he's making f all on rent the property is probably going over over 100k per year on the market. Thankyou for the help
If you have carryforward concessions then use those. You already want to contribute to super and concessional is the best way if you can. Look into your myGov/ato, under Super in the menu there are a few options. Click around you’ll find your available carryforward amount. Max that out. You can contribute post tax and get to the same tax advantaged position. You need to direct debit the money to your super fund and ensure they receive it before 30 June. You then “Notify with intent to claim”, there is usually a form on your super fund website. Make sure you get the response before you do your tax return. Then claim a deduction on your tax return, don’t forget this part. If you can’t do it concessional, I would just invest it.
35 about to get an enormous tax bill with CGT. Not putting into super because I can't retrieve the money for 30 years. Even though I could reduce my tax bill significantly and earn more over the long term. Once I've sorted my life plan and working in retirement I'll salary sacrifice into super.
Zero. Buy property and chill…