The Benefits of a Superannuation Fund for Retirement

Posted on: 24 August 2015

A superannuation fund is a retirement fund that is meant specifically for accessing when you retire, and it offers many benefits over standard investments and pension plans. While it's not meant to be accessed until you retire or in case of an urgent financial situation such as permanent disability or terminal illness, it does offer many advantages over other types of retirements plans. Note a few of the benefits of such a fund here, and be sure you talk to your accountant or financial planner about any changes that may have been enacted for such a fund before you decide it's the right choice for you.

1. Current maximum taxation

Currently, the maximum taxation rate for employer and personal contributions to a superannuation fund is 15%. This is generally less than personal marginal tax rates. Even if the rate fluctuates, it is meant to be lower than personal rates, so you should pay less in taxes when you contribute to your superannuation fund than you would for standard income.

2. Tax deduction

Contributions to your superannuation fund can be tax deductible. Ask your accountant or financial advisor on how to ensure you can deduct these contributions from your taxes each year. This means that you are not only taxed at a lower rate, but being able to deduct the contribution reduces your tax bill overall as well. This can make it a wise choice for those who need to reduce their tax bill overall for any financial reason.

3. Earnings are tax free

While in the pension phase, meaning that you are accessing the funds during your retirement years, the personal and capital gains earnings are tax free. This can be a more sound economic choice than relying on the sale of a house or other real estate to finance your retirement, as you often need to pay capital gains taxes on such earnings.

4. Benefits paid tax free

In the event of your death, the benefits of a superannuation fund can be paid tax free to your dependants. This makes a superannuation fund a good financial choice for estate planning and when preparing your will. Your dependants will not need to worry about paying a tax bill after receiving their inheritance with a superannuation fund, which is not only financially beneficial for them but also means less stress and hassle with financial paperwork after your death.

Always talk to your accountant about any changes to the structure of a superannuation fund and to see if it's the right choice for your retirement savings.


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