Episode 36 – Inside Super vs Outside Super, Where Should I Invest?

On this weeks podcast episode we’ll be taking a deep dive into one of the most common questions we get as financial advisers and that is whether or not you should be adding to your super or investing outside of super. We’ll go into some of the positives and negatives of each which will hopefully allow you to make a decision about what may be best for you.
People rightly want to make sure their money is working as effectively as possible for them and tax can be a big consequence of this. For most people who are working super will provide a better tax environment that investing outside will. Investment earnings are taxed at 15% inside super where as if investments are held outside of super in your name they’ll be taxed at your marginal tax rate. This ultimately means more dollars back in your pocket and therefore a bigger balance at the end of the day but that is not the only thing on your mind when you’re looking at answering where to put your surplus funds.
Super can be great from a tax perspective as we’ve mentioned but it has it’s limitations and they come in the way of accessibility. Depending on your age you may be a while away from actually being able to gain access to those super monies and therefore you need to decide what the intentions for the money is and when will you need it. If it’s funds that you want to put away for retirement then you need to decide at what age you’d like to retire. If you’d like to retire before you reach your preservation age then having the funds sitting in super where you can’t touch them can cause a problem and therefore the flexibility of having the money sitting outside where you can have it whenever can be advantageous.
Another thing to think about that can effect your ability to gain access to your super is legislation risk. There is always the risk that governments may look to increase the preservation age out as they have done fairly recently and therefore plans with the money that you’ve put in with the mindset to get out at a certain time can be pulled out from underneath you and there is nothing that you can do about it. There is always a chance that this can happen going forward, especially with Australia’s ageing population and the fact that Australian’s are living longer and longer. 
Whenever you’re looking at investing in super you need to make sure you have adequate cash flow and an appropriate cash buffer because as we’ve mentioned above if you put the money in and need access to it for an emergency it can be nearly impossible to gain access to. If you are getting close to retirement and preservation age and have appropriate liquidity outside then super can be a more efficient option due to the tax consequences. As always it depends on your personal situation! 
We hope that you enjoyed this episode of the podcast and as always if you have any questions feel free to email connect@pekada.com.au or hit us up on any of our socials!
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Wealth Collective trading as Pekada (ABN 95 624 612 684), corporate authorised representative (CAR), number 1263725, is authorised to provide financial services on behalf of Communitas Wealth Pty Ltd.

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