Published in BRW, page 45, Tuesday 22 July 2010.
Despite drops in the Aussie dollar and a volatile share market impacting our superannuation balances of late, a smart superannuation plan still forms an essential part of a business owner’s retirement strategy, according to leading Brisbane Accountancy firm, elliotts.
Managing Partner of elliotts, Matthew Schlyder, said the recent global economic crisis, as well as a falling dollar and unstable share market, have caused local business owners to consider other types of investment to plan for their future.
“Over the last year and a half, many of our clients across a variety of industries are showing a strong favour toward alternate investment opportunities, like property, and investing fewer voluntary contributions into their super fund,” Mr Schlyder said.
“However, a smart superannuation strategy that is tailored to the individual and his/her current and projected business situation will pay dividends in the long run.”
The importance of a healthy superannuation fund, according to Mr Schlyder, has also recently been recognised by the Federal Government, with the April announcement that it will gradually increase compulsory employer superannuation contributions from 9% to 12% between 2013 and 2019.
Mr Schlyder said that business owners often overlook the fact that, when an individual makes concessional contributions to a superannuation fund, provided the tax rate on the income against which they claim the deduction is more than 15%, there is effectively a greater amount of capital to invest.
“Due to these tax benefits, the resulting amount is so much higher. For example, over a 10 year period of investing $10,000 of income in superannuation each year as a concessional (tax deductible) contribution, versus investing in a tax environment of 39.5% outside of superannuation, assuming 4% income and 5% capital growth, the difference is $136,042 within superannuation as opposed to $91,593 outside of superannuation,” he said.
“Not to mention that the earnings in a superannuation fund are tax free when you begin to draw on them once you are entitled to do so.”
Mr Schlyder also denied reports that superannuation returns are poor, compared with other assets.
“Superannuation is an easy target, because the returns are evident for all to see. But, ironically, the performance of assets outside of super often follow the same path, as the majority of passive assets are invested in the same three assets that individuals invest in: cash, property and shares,” he said.
However, Mr Schlyder stressed the fact that, like any other investment, an individual’s superannuation fund requires active involvement by the investor, rather than it being ignored and treated as a “set and forget” strategy.