You would be right in thinking that Superannuation taxes earnings and employer contributions at 15%. In the grand scheme of things this is a pretty good legal tax minimization scheme (pity about all the other rules of Superannuation - but let's not go there!). However, here is a trick to not only negate this 15% tax but to also get a 15% 'refund' inside your Superannuation.
It is a stupidly simple approach and it only has two steps:
1. Open a Superannuation accumulation account that allows you to trade shares - I use the Choiceplus platform inside my Hostplus Superannuation.
2. Simply only buy sensible fully franked dividend shares inside your Superannuation. The 15% 'refund' will automatically happen without you having to lift a finger.
Because shares that are fully franked already have 30% business tax paid on them in Australia, that means that this tax actually exceeds what is required to be paid inside Superannuation. Because Superannuation only requires 15% tax then the other 15% tax is paid back to your Super' fund.
The bigger your Superannuation balance grows the better this strategy works. You will still pay 15% on employer contributions, but by using this strategy you will stop paying tax on earnings and attract a 15% rebate. You will get to a positive tipping point when your dividend earnings begin to exceed your employer contributions and thus negate the 15% tax paid on your employer contributions too.
I guess this is positively gearing your Superannuation ;-)
It gets even better once your superannuation is in retirement mode as earnings inside Superannuation are not taxed at all - so then the full 30% tax from fully franked dividends would be credited back to you inside your Superannuation Pension. Your dividends are then worth far more during retirement.
Anyhow, I am not a financial adviser - I'm just sharing what I do to get the maximum legal tax benefit out of my compulsory Superannuation account. You do your own research and seek unbiased advice.
Take care and stay nice folks.
Mr HM (Phil)
Oh, our post picture today is a visual encouragement to get rid of your credit card debt.