There are many ways to improve your retirement savings that are not dependant on the performance of investment markets or the type of investment you prefer to hold. For example, where you hold your investments can make a vast difference to your retirement savings.
Many Australians prefer to hold their investment assets in their own personal names, for various reasons. Holding investments in your own personal name means the tax you pay on income and capital gains earned from the investment is taxed at your marginal rate of tax. For example, if you earn a $100,000 salary and you earn $30,000 of investment income, you will pay tax on the investment income of $12,450. Assume your investment is valued at $500,000, and you decide to sell it. If you originally bought the investment for $400,000 5 years ago, you will generate a capital gain of $100,000, and could be liable for capital gains tax of $20,750.
If the same investment is held in the superannuation environment, the tax payable on the $30,000 of investment income would be taxed at $4,500, a tax saving $7,950. If you sell the same investment, the tax payable on the capital gain of $100,000 would be $10,000, a tax saving of $10,750. The total tax saving is $18,700. Better still, if you are drawing a pension from your superannuation fund, the tax payable on the income earned would be nil, and the capital gains tax payable on the sale of the investment would also be nil. Therefore, in pension phase a tax saving of $33,200 is possible just by holding the investment in superannuation rather than in your personal name.
For a confidential discussion on how this or other strategies may improve your financial position, call Power Wealth Management today on 1300 975 224.