Tax Implications for Money in Super Versus Managed Fund

Hi everyone.

I currently have money in Australian Ethical Super. I have been happy so far with the return in the Australian Shares option. I did some research and they also have managed funds.

I was wondering if instead of investing in their managed funds could I just put all the money into their super instead? Would I be able to access the money I contributed in an emergency? Or would it be locked in until retirement age? A friend told me he used to put money into super and take it out again but this was many years ago.

What are the rules and tax implications these days?

Thanks.

Comments

  • Talk to your accountant. Your friend has reached retirement age and was using recontribution strategy?

    • He hasn't reached retirement age yet. He is 61 years old. He did it in the 80s or 90s I think.

      • He did it in the 80s or 90s I think.

        Back then, people who made additional contributions were able to withdraw it again if they wanted to (aka "unrestricted, non-preserved").

        Then a change came in and the ability to withdraw was limited only to any contributions made before July 1999, effectively wiping out these withdrawals.

        Now, any funds that go into the super system is generally locked away until retirement age. Funds can only be withdrawn in very limited and very specific circumstances.

        Be very careful what you put in there because your idea of an "emergency" is not necessarily the same as what's specified in the rules that govern the system.

      • The rules were totally different in the 80s (I was working then too). Totally disregard your mates advice or opinion.

        Consider any superannuation contributions locked away.
        Here are the current access rules:
        https://www.ato.gov.au/individuals/super/withdrawing-and-usi...

        You can also have early access under conditions of extreme hardship.
        https://www.ato.gov.au/individuals/super/withdrawing-and-usi...

  • -1

    as far as I know there is some provision for emergenoies but you will have to check this, I met a woman who got some

  • +1

    Any money you put in to super will be locked away ("preserved") until retirement age (age 60 for anyone under age 50).

    There are emergency "conditions of release" (google that term) which allow you to access super earlier but their definitions are quite harsh and the amount is sometimes capped at $10k. Alternatively, wait for a 100 hundred year pandemic and hope the government lets you take $10k out.

    In short, great idea if saving for your retirement, terrible idea if you want to access the money before age 60.

    Also, let your Boomer friend know that today's super rules look nothing like they did back in the 80's and 90's.

  • There are good up to date books on super. Read up is my advice - it can be quite complex, but can also be very tax effective. It’s best to have a plan based on a good understanding of what you are getting into, but it’s not always necessary to have an expensive plan drawn up. Many super funds have free information sessions.

  • I was wondering if instead of investing in their managed funds could I just put all the money into their super instead?

    You could.

    Would I be able to access the money I contributed in an emergency?

    In general, no.

    Or would it be locked in until retirement age?

    In general, yes … or more specifically until you meet a "condition of release".

    A friend told me he used to put money into super and take it out again but this was many years ago.

    Many, many, many years ago … I can't recall when this was stopped, but we're talking 30-odd years ago.

    What are the rules and tax implications these days?

    The basic rule is whatever money is in your super is locked in until you reach a condition of release, which for most people is reaching the relevant "preservation age" (effectively the defined age of retirement).

    The thing you need to understand here is that you should only put money into super that you're not planning on needing until retirement. Don't put money in there that you think you're likely to need (for any imaginable purpose) before retirement.

  • +1

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