Home – New Forums Money matters Self Managed Super Fund or Term Deposit?

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  • #979146
    Dad_of_Arlo
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    Hi guys,

    I know it’s not compulsory to pay into super as a business owner, however I like the idea of keeping something adding up on the side for down the track and have been thinking about the options – Super Funds or term deposits. To me the idea of an annual payment going into a term deposit sounds preferable to locking anything into super – anyone out there with experience doing this able to share their thoughts? Any good reasons for going down the super path would also be appreciated.

    Thanks a tonne, I look forward to hearing from you.

    Cheers,
    Matthew

    #1112321
    MH08
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    I think you have to ask yourself, how liquid would you want your cash?

    SMSF is for the long term, as for term deposits this can be a medium term for its maturity, also remember to take in inflation into account, may sound all randy, with a 6% return, with inflation at 1.6% (odd) and management fees at 1.2% or less, who ever your with.

    Deciding in what investment you want to take, will come down to the numbers.

    #1112322
    Dad_of_Arlo
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    That’s why I lean towards term deposits, I’d rather not have the funds tied up for so many years. My main point here is to hear from others who have made this decision, both sides, and how they now feel about it – How do you find it, would you change your chosen way if you could go back? Why?

    #1112323
    Cjay
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    Specific financial advice restricted to Financial advisers, but just a couple of things to consider:

    Superfunds mean that you’ll have it locked away for potential quite some time, whilst being subject to changes in rules for accessing your super etc. On the plus side you have a tax treatment which in many cases favours this structure.

    With SMSF’s as well there are setup, yearly auditing and general management fee’s which will eat into your return. Without a large enough balance, you could potentially be going backwards! The rule of thumb I commonly hear is that you need 200k in assets in a SMSF to make it viable. Once again, better to ask a financial adviser about your specific circumstances.

    On the other hand, you have direct owned term deposits. Nothing that hair-raisingly interesting, with after-tax and inflation your return is likewise not that interesting.

    If anything, I would suggest you sit down and try to nut out what your end goal is, for example a retirement nest egg, a passive income, or perhaps a safety net. Either way, once you know the destination, it is much easier to know how to make the journey. :)

    #1112324
    Divert To Mobile
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    There are tax benefits that come with investing through a SMSF
    Yes you can still control and choose where to invest (within the rules)
    there are additional maintenance costs over non SMSF investing.
    great benefits if you make it to retirement age.

    Steve

    #1112326
    Robert72
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    Hi, i agree with Steve comments.
    I think comparing superannuation and a term deposit is not the way you should be looking at this issue. Superannuation is tax structure and not an investment.*

    How you invest within superannuation and particularly via a Self Managed Superannuation *Fund is completely up to the investor, which can include a term deposit.*

    If you are paying higher tax rates, then investing into super is a great option to reduce your taxable income and limiting the tax on the contribution to 15% in preference to our marginal tax rates of up 45% plus medicare. (There are limits on how much we can contribute each year) This also includes the income from the investment on an ongoing basis.

    Just a quick example may be if you were to invest a before tax $20,000 into superannuation you would have a after tax funds in super of $17,000. (If you choose to claim the contribution as a deduction) Compare this to investing in your own name at a marginal tax rate of 32.5% plus medicare of 1.5% leaves just $13,200 for investment.*

    Theres the upside, the downside is your money is lock away till you meet a condition of release, which depending on your date of birth will be between 55 and 60. And as we know the government change the rules regularly, which can be considered a risk.

    The tax entity/structure you choose invest your hard earned, is as important as what you investments you select.*

    Please note this is general advice only, seek personal if you need advice that takes into account your personal situation. *(Sorry for the disclaimer)

    Hope that helps.
    Rob
    http://www.meritumfg.com.au

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