Understanding superannuation

Noel Whittaker
Noel Whittaker

SUPERANNUATION is the perfect savings and tax minimisation vehicle. 

Nothing else offers you the ability to invest with pre-tax dollars, enjoy tax on the earnings of 15% and then make tax free withdrawals once you reach 60. 

It’s about the only tax break a PAYG employee can get these days, and is ideal for anybody in business as it’s one of the few assets that cannot be touched if you go broke. 

Sadly there are still a large number of Australians who fail to understand that superannuation is not an asset like property or shares, but merely a structure that owns those assets.  As a result, when share markets fall,  superannuation always get the blame. 

The result of this misunderstanding is a general distrust of super which is not helped by some of the ridiculous statements that get air time.  The latest is a claim that within fifteen years superannuation funds may be forced to freeze assets and ban withdrawals, because the retired baby boomers will be taking out more than the rest of the workforce are contributing. 

This is clearly impossible – the superannuation industry can only run out of money when there is no cash, property or shares left in the world.  Remember, it is merely a vehicle that owns them. 

The big problem is that too many would-be investors focus on the illogical scary snippets that make the headlines, and consequently never get to focus on the real problems. 

Think about this. Even though the superannuation industry can never run out of money because it is merely a receptacle for assets- governments are a different animal entirely. 

Unable to create wealth of their own, they are merely conduits that raise taxes and redistribute them.  Within twenty years the eldest baby boomers will be in their mid-80s which is usually when most of them will be thinking about entering aged care.  The big worry for them is that there will be insufficient places, and carers available at the same time as aged pensions will be under pressure.  That is the real crisis facing this country.   

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is

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