Issue: 42
Sent: 12-06-2006 14:02:19
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Repaying Your Home Using Super Contributions - Tony Negline
It has not taken long for a new super strategy to appear in the media.
The new strategy involves making a loan (such as a home loan) interest only and turning the old capital repayments into super contributions. These super investments are invested tax effectively and then can be withdrawn tax-free once the investor turns 60 (under the governments proposals). If salary sacrifice is used with those old capital repayments as super contributions then an even bigger benefit can be obtained.
This strategy has always been available but did not really work because of the exit tax that applied on super. The tax-free nature of withdrawals makes this strategy very viable for many people.
But for how long should the strategy cover? This weeks newspaper looks at strategies involving 20 + years. I wonder if twenty years is a little too long. Perhaps this strategy might be better for people with up to 10 years to retirement. After all the taxation of super will have to change at some stage in the future.
The most recent Weekend Australian also contains an article about comparing investing in property via gearing or investing in super. The article is very good and well worth a read. (I think you can still look at it for free on the Australian's website.)
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