Funds in Super or Offset?

bobwokeup on 21/05/2025 - 16:50

Our rental investment loan is currently $535k and we have an offset account that is usually around $60-70k which we also use for daily purchases.

My question is should I pull $20-30k out and top up my super (might semi retire in 10-15 years to keep my brain healthy) or leave it in the offset account and maximise my tax savings?

FYI with the super carry forward rule I can contribute up to $57k in super and I already have roughly $100k in other investments like ETFs, shares and small amount of crypto.

Financial Superannuation

Comments

  • mskeggs on 21/05/2025 - 16:58
    +8

    You can't get the super till you turn 60, so consider that.
    The offset decreases your interest tax deduction, so if you have a PPOR home loan it would be better there.

    • bobwokeup on 21/05/2025 - 17:07
      +4

      Yeah I did think about that and my plan is to not need the super funds and use my investment funds. So I see the super as a forced savings to have more flexibility when we’re fully retired.

      Our PPOR is fully offset, we did that so that when we decide to upgrade houses it will be a rental and then withdraw the funds to put in the new offset account.

      • bheart on 21/05/2025 - 21:54

        what happens when you loan is fully offset? They don't close the loan?

        I noticed that having an offset will actually pay down principle faster due to you paying less interest and more principle as part of repayments. This will make deductible loan less. Not sure how to get around that (ie maintain maximum deductible loan)

        • SlickMick on 22/05/2025 - 09:36
          +1

          They don't close the loan?

          Nah (not homestar anyway)

          I noticed that having an offset will actually pay down principle faster…

          For sure… usually….
          I'm sure this isn't usual, but homestar changed our loan to interest-only (^unofficially) once it was fully offset.
          (^I can't remember whether homestar stopped taking payments, or I cancelled the direct debit. But since I was withdrawing the same amount from offset as was paying into loan, it seemed pointless (to me at least… and maybe somebody at homestar??). The loan is still "officially" P&I, but the P has not been paid in 18 months and there's been no complaints.)

          So there has been no transaction on loan or offset in last 18 months.
          For the 18 months before that, I was withdrawing the same amount from offset the day after paying the loan each month.

          Maybe they're reducing my "Available to Withdraw" each month?? If so, I'll probably have to start making payments again in a couple of years.
          Otherwise maybe just at the end of the loan term they'll shut it down??

    • jv on 21/05/2025 - 17:16

      You can't get the super till you turn 60

      Yes you can… It's just a lot harder…

      • bheart on 21/05/2025 - 21:55
        +1

        technically correct

        • moar bargains on 22/05/2025 - 12:40
          +1

          The only type of correct JV goes for

      • Zeph101 on 23/05/2025 - 14:13

        You can start accessing super from age 55.

        However the maximum you can withdraw is 10% of your balance and you will end up paying tax on the amount you take out.

        • jv on 23/05/2025 - 14:16
          +1

          If you look at the legislation, there are certain conditions where you can withdraw all of it…

          • Zeph101 on 23/05/2025 - 14:34

            @jv: That is true, but thats where your hurdles and difficulty come from.

            Starting a Transition to Retirement Income Stream (TRIS) allows you access to the funds a bit earlier at least.

            Depending on the balance can give you the opportunity to try and clear out some of the taxable component of the balance if possible.

    • McMaferMur on 21/05/2025 - 18:26
      -1

      @mskeggs
      The offset decreases your interest tax deduction (investment property)
      but if i put in saving account the interest will get taxed as income. is this still better?

      • mskeggs on 21/05/2025 - 18:31
        +1

        The comment was specifically about residence offset versus investment offset, as the residence interest is not deductible.

        If you want to compare tax effectiveness of loan offset vs investment, it is whichever gives the better return.

        • McMaferMur on 21/05/2025 - 18:35

          i see.. problem is i am not comfortable to keep all spare cash in investment (property, shares, coins, gold etc) so now i need to compare between put in offset (investment prop) or just pure saving account

          • mskeggs on 21/05/2025 - 18:36
            +1

            @McMaferMur: A good night's sleep is worth a lot. Don't chase extra small returns that make you uncomfortable.

          • SlickMick on 22/05/2025 - 09:48
            +1

            @McMaferMur: You have to choose between being comfortable and watching your wealth erode, or stepping out of your comfort zone and putting your money to work.

            Some people want to be debt free, and that's fine. But after paying tax on interest on a savings account, or money isn't growing as fast as the cost of anything it can buy. I would only ever want to hold "emergency funds" in a savings account, but prefer to to use an offset account for that.

            The best place for spare cash you can live without until retirement is in super. The alternative is to "invest" in your PPOR (e.g. renovations that increase your capital value), which you won't see until you sell your home.

            • McMaferMur on 22/05/2025 - 11:00

              @SlickMick: @SlickMick i have the super toped up, shares, property as well. This is the emergency funds. i just feel the offset (albeit investment) still better than saving account if that is the only 2 to choose.

              • SlickMick on 22/05/2025 - 11:22

                @McMaferMur: ah goodo. yeah after paying off or offsetting PPOR, an investment loan offset makes a great emergency fund.

                Just reconsidering: It does depend on what interest rate you can get. If savings interest after tax > interest on mortgage - tax deduction it could be worthwhile.

                But my wife doesn't like all the debt, so yeah offsetting the investment loan is our approach.

                • McMaferMur on 22/05/2025 - 11:41

                  @SlickMick: Mine doesnt like toi but lucky the properties are all mine so she doesnt have a say haha. I just offsetting one, the others are not, I pick one with the highest mortgage int. Saving is with ing.

                  • SlickMick on 22/05/2025 - 12:04

                    @McMaferMur: Yeah that's the way to go, if you can get cheaper loans without offset, you only need one.

                    I regret having properties in only one name. My wife now earns more than me, so who's name it should be in has changed over time (though splitting the deduction would have been fine all along). But when it comes time to sell we could have had 2 tax free thresholds to offset the CGT, so there's an ~$18,000 bad decision right there.

  • jv on 21/05/2025 - 17:15
    +1

    My question is should I pull $20-30k out and top up my super (might semi retire in 10-15 years to keep my brain healthy) or leave it in the offset account and maximise my tax savings?

    Do the sums…. One maximises tax savings more than the other…

    • bobwokeup on 21/05/2025 - 22:33

      That’s why I posted here, how do you do the sums?

      • jv on 21/05/2025 - 22:34
        +1

        On a spreadsheet.

        • bobwokeup on 21/05/2025 - 22:36

          It’s a hard one to do as the offset balance will change often over time. So which one do you think is better and why?

          • jv on 21/05/2025 - 22:38

            @bobwokeup:

            the offset balance will change often over time.

            Why? Just subtract it from your mortgage and see how much interest you'll be saving (tax free)…

            • smalltime0 on 22/05/2025 - 12:51

              @jv: Well the RBA only just changed the cash rate…

          • SlickMick on 22/05/2025 - 10:19
            +1

            @bobwokeup: If your investment in super returns more than the interest on your loan (which it should), your money is better in super.
            Plus, the tax deduction from not reducing your taxable loan > tax on super earnings.

            Here's my rough calcs:
            In offset you're saving $1500 interest, but you would have got a $555 tax deduction on that interest, so it's benefiting you $945pa.
            In super, you'd earn $2400 in an ETF, less $360 tax = $2,040 benefit.

            Then, in the future, when you retire, the tax on earnings becomes 0%, you've protected your investment from CGT.

            • McMaferMur on 22/05/2025 - 12:01

              @SlickMick: You are really slick in money, mick :)

              • SlickMick on 22/05/2025 - 12:05

                @McMaferMur: lol this is what happens when you have trust issues and won't use an accountant of adviser and need to work everything out yourself.

                I've seriously considered I should work in that field, but it seems so boring :)

                • McMaferMur on 22/05/2025 - 18:07

                  @SlickMick: this time, you are wrong i am working in the industry (kind of) and i witnessed how those advisers works and behaves, enough to make me think it is not worth to pay them

  • Benoffie on 21/05/2025 - 17:24
    +5

    Personally, until there's clarity about the taxation for Super this cycle, I wouldn't be committing any additional funds to Super.

    If you have a mortgage and in your 40s, that should be the priority. Super, once taxation and your position is clear, is hit hard when you have spare cash.

    • mskeggs on 21/05/2025 - 18:32
      +1

      I hope you get a super balance over $3m to be impacted, it would be a great position to be in!

      • Benoffie on 21/05/2025 - 19:31
        +9

        They're now talking about dropping it to $2m

        Any government who moves goal posts as rapidly as 3 years - one cannot lock additional money away and think 'oh, theyll never change the tax environment on this'

        10/15/20 years is a long time. My money is on at least someone actioning the reports to realise missed taxation by retrospectively chasing tax concessions in Super on ALL amounts.

        It'll be a bloodbath - but they'll do it under the guise of paying for health and NDIS especially as aged population rapidly declines and the Super is eaten in RAD payments or transfers to children

        • Gdsamp on 21/05/2025 - 20:16
          -3

          Albo's Australia

        • mskeggs on 21/05/2025 - 20:35
          +1

          Do you have a link for the $2m cap claim? I haven't seen that.
          I'm not that concerned because it just removes the attractiveness of super for bigger balances, as it is less hassle to hold in corporate or personal names than in super.

          The objection is 100% about people wanting to maintain tax advantages on large balances. If you happen to strike it rich and one of your investments in super suddenly is worth millions, big deal, pay the tax. If you don't want the risk, hold that investment outside super.
          If you have structured your millions of investment to be in super now, I guess you will be making a lump sum withdrawal and will be sad you pay a bit more tax.

          • miwahni on 21/05/2025 - 21:48
            +5

            @mskeggs: Re $2m cap above which earnings will be taxed at 30% instead of the current 15% (not a cap, but I'm sure you know that) - not a Labor policy but something that the Greens are pushing.

      • jv on 21/05/2025 - 22:35
        +1

        I hope you get a super balance over $3m to be impacted

        Not for Albo.

        He'll get close to $10,000,000 super over 20 years and will not have to pay a cent in extra tax…

        All paid for by us taxpayers…

        • cashless on 21/05/2025 - 23:01
          -3

          How much does Scummo earn?
          He had 4 or 5 jobs as PM, so he must be on a good earner

          • jv on 21/05/2025 - 23:14
            +2

            @cashless:

            How much does Scummo earn?

            Dunno, but he's not introducing a new super tax to steal people's savings and then exempting himself…

            Nice try at deflecting though…

            • cashless on 21/05/2025 - 23:24
              -1

              @jv: Reckon your buddy Scummo is pulling a nice pension courtesy of the Aussie taxpayer. Could even be double dipping if he claims for previous employment as Minister of Health, Minister of Defence and Sinister of Finance.
              If you’re looking to frame a politician as a career criminal, look no further than your failed fireman, Scummo

              • jv on 21/05/2025 - 23:26
                +2

                @cashless:

                Reckon your buddy Scummo is pulling a nice pension courtesy of the Aussie taxpayer.

                But not exempting himself from a theft tax imposed on everybody else…

                Albo is a thief.

                • cashless on 21/05/2025 - 23:31
                  -3

                  @jv: Maybe Scummo claims a Fireman’s pension as well. I’m sure that was on his CV along with the other nice earning jobs he was racketeering from as PM

                  • jv on 21/05/2025 - 23:45
                    +4

                    @cashless:

                    Maybe Scummo claims a Fireman’s pension as well.

                    Albo is taxing that though. He's only exempting politicians because he thinks they are better than other Australians…

                • SBOB on 22/05/2025 - 06:17

                  @jv:

                  But not exempting himself from a theft tax imposed on everybody else…

                  Where in any policy discussion does it indicate that federal policitian super balances would be exempt?

                  (Noting the previous policy failed to get through parliament and the senate before the election, and therefore needs to be re raised later in the year and the usual passing of whatever policy through both houses of parliament. You're talking like it's currently actual applied tax policy.)

                  • jv on 22/05/2025 - 09:33
                    -3

                    @SBOB:

                    Where in any policy discussion does it indicate that federal policitian super balances would be exempt?

                    That's right, he didn't even disclose it that he will make himself exempt from the tax…

                    Maybe he'll use the savings to buy another $5 million property at Copacabana…

                    • SBOB on 22/05/2025 - 10:54

                      @jv:

                      he didn't even disclose it that he will make himself exempt from the tax…

                      So…it's not part of the policy and you're just assuming whatever talk back radio segment you're listing to was accurate?

                      • jv on 22/05/2025 - 11:01

                        @SBOB: Albo hasn't denied it.

    • SlickMick on 22/05/2025 - 10:41

      I foresee major regret in your future.

      Yes, PPOR is a great investment, and if you are in a position to pour excess funds into that, it's a fine way to go.
      But once you've paid off PPOR, unless you upgrade or renovate, it's time for super.

      IMO the best financial situation you can be in is a fully offset PPOR loan (that's your emergency fund), and put what you can into super.

      In hindsight, I don't think I would hold any investment outside of super (other than PPOR). (I'm in no fear of reaching any cap.)
      We negative geared to reduce income tax, but now that I'm within sight of retiring, I don't want to do the sums on whether those investments would have been better in super. (I have a feeling CG far outweighs earnings over the long term. I'd love someone to prove me wrong so I can feel better about decisions I've made in the past.)

      Maybe one investment loan is handy to have an offset account slush fund. (Pay off the loan when your not taking holidays and buying boats or whatever, but increase the deductible interest when you do spend.)

      I wouldn't be waiting for clarity about super. It's always going to be there to reduce the gov paying pensions. If you're going to have more than enough to replace your income in retirement, only then would I be considering not investing in super.

  • Kongzi on 21/05/2025 - 18:15
    +4

    If you're trying to maximise your money, super will win due to 15% tax compared to your income.

    • mskeggs on 21/05/2025 - 18:33
      +1

      Agreed, if the locked away to retirement issue is acceptable, and assuming usual tax burdens.
      I've learnt to be circumspect on this site, as the next comment will be "I earn my income via franked dividends paid by a business with $30m of tax losses in the kitty. Is super still correct?"🤣

  • Lunarboogie on 21/05/2025 - 22:06
    +1

    If you do the sums, super comes out ahead. Your offset is saving you circa 5% but super averages 8-9% (and that's in a generally low risk, balance growth option). Throw in the tax benefits of making additional concessional contributions, and it becomes more of a no brainer.

    If you want your excess dollars working hard for you, invest in a high growth super option - 15 years is enough of an investment horizon to ride any bumps. If you want to play it safe and bask because you're saving a modest sum, keep it in your offset. I am in a similar boat to you and chose super.

    • bobwokeup on 21/05/2025 - 22:39

      Yeah was thinking the long term growth of super but if I do that I’ll be paying more on the investment loan which I know is claimable, just don’t know if that’s worth it.

      • Lunarboogie on 22/05/2025 - 05:43
        +2

        You'll be two times in front if your money is earning double the return (offset v super).

        There are plenty of examples online that crunch the sums for similar scenarios like this. All things being equal, if the 5% v 9% holds (which it should given your 15 year horizon and past performance) plus the big tax benefits of carry forward and concessional contributions, than you'll be able to pay off the IP in 15 years time AND have $250k or so in your skyrocket (or more if you hit your cap of $30k every year). If not, the alternative is keeping your funds in the offset and only paying your mortgage down in 15 years time. Due to the tax advantages of super you get to do that plus earn a nest egg.

        I would worry less about the naysayers who either bleat about the unpredictability of the market going forward (wrong) or think the government will come marauding through and rip you off (conspiracy theory much). They're the ones who'll be struggling on the aged pension in retirement (ironic given their lack of faith in the system) while the smarter ones play the cards as given and end up with a dignified retirement. I know which I'd rather be.

        • bobwokeup on 22/05/2025 - 08:45
          +2

          Thanks for the detailed response, yes this makes much more sense than the conspiracy theorists. Also I just read that I can only do my carry forward super until I hit $500k super which is starting to approach so there’s that to consider too.

          • Lunarboogie on 22/05/2025 - 21:25

            @bobwokeup: If you're still under the $500k cap as at June 30 2024, you can carry forward your entire eligible balance this FY, which in your case is $57k. So even if you had 499k last year in super for example, you could invest the entire 57k before June 30 this year and be eligible to write it off this year's income. You have to pay 15% on it as it enters, but you can reclaim your marginal tax rate during your tax return. This is why the carry forward rule is such a barn burner. Show me where else you're guaranteed an automatic 24% result in year one (37% + 2% medicare levy - 15%).

            Just making it clear in case other readers weren't sure of the rules.

      • Lunarboogie on 22/05/2025 - 05:51
        +1

        Also, you're not actually saving 5% by keeping your money in the offset. Because it is an IP, you need to deduct 40% off the interest rate (or whatever your marginal tax rate is) because interest payments are tax deductable. So in your scenario, you're saving only 3% by not changing your current approach which is barely matching inflation. Your money can and should be working a lot harder for you.

  • LanceVance on 22/05/2025 - 10:20

    Considering the ever growing state can't keep their hands of the giant pool of funds that is Australian's super accounts I wouldn't throw any more money their way. Getting yourself financially (debt) free would be my priority in your situation.

    • SlickMick on 22/05/2025 - 10:50

      That's not a very productive use of available funds. No matter what they do to super, it will always be the best place for excess funds that you don't need until you retire, up until you've established sufficient to finance your retirement.

      No one will never make super unattractive, as it would increase their burden to pay pensions.

      They only time to look for alternatives to super is when you've maximised it.

      • LanceVance on 22/05/2025 - 14:17

        Are any funds an excess while you're still in debt? You misunderstood my statement.

        • SlickMick on 22/05/2025 - 15:40
          +1

          Are you talking about non-taxable debt? Because definitely you can have excess funds and be up to your eyeballs in debt. Exhibit A - me.
          No way I'm paying off deductible debt with taxed dollars that I can contribute tax-free to super.

          But if your paying off PPOR, then yeah you don't have "excess funds". Then my priority would be:
          1) Minimum loan repayments
          2) Super contribution up to full concessional contributions cap
          3) Extra loan payments (preferably to offset account so can also be emergency funds)
          4) Eating out/ socialising/ anything that unnecessarily costs money
          …
          99999) Entertainment subscriptions

          I don't think I misunderstood your statement. I think perhaps you failed to clarify that you meant non-deductible debt, but that isn't the OP's situation, so not sure of the relevance. Otherwise, you seem to suggest that clearing debt > super, in which case I disagree.

          • Lunarboogie on 22/05/2025 - 21:37
            +1

            @SlickMick: This. The debt in OP's case relates to an IP and therefore is tax deductable. As SlickMick rendered it so slickly, it's not smart paying down tax deductable debt with after tax dollars (which was the OP's original question) when you can invest in super with pre tax dollars.

  • SlickMick on 22/05/2025 - 10:55
    +1

    Just a final thought, when you say semi-retire, just be aware that the advantages of super don't kick in until full retirement and start pension phase.

    So you just need to consider whether you want to live off other investments during semi-retirement (the CGT might make you cry), or eat into your super.

  • Some Guy on 22/05/2025 - 11:03
    +2

    Max out super using the carry forward - be aware of the $500k limit, then max out $30k/year via salary sacrifice.

    I would use offset funds to max out carry forward. Then use remainder of offset funds to fund other investments or if you don't have enough, leave it there (reducing interest) until you do.

  • pdperth on 22/05/2025 - 17:26

    Hi, if you have a loan that is fully offset, don't pay it off before you retire since you will not be able to get a loan after you retire. Even with $5 million assets or whatever you will not get a loan without income. It's great having a backup of funds that are there if needed. Make sure the offset is fully cost free though. I'd be tempted to fully offset the loan and then start wacking as much as possible in to super… You'd have to do the calculation.

    • SlickMick on 23/05/2025 - 08:46

      My thought was to refinance just before retirement to get a full 30 years of cash available. But that would end about the same time super would run out and I might fret about living too long :)

      My wife doesn't like debt so we're aiming to pay everything off, and sell assets as necessary in retirement.

Login or Join to leave a comment
Login Join