How To Pay No Tax Inside Superannuation

Hi folks

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.


  1. Hi Mr HM,
    I'm really enjoying these posts about managing our finances, especially when you start talking about the retirement stage of life. Firstly, thanks to your post yesterday, I'm going to stock up on more Argo and AFI shares to create more income. (Suggestions of others would be welcome) I particularly like today's post too, but now I'm wondering if I should stock up on those shares through my super or through my usual trading account, or a bit of both?? Also, when I log into my super account on-line (which I reckon everyone should do and I'm ever grateful to you for prompting me to do so) I'm OK with getting around most of it BUT the Choiceplus section is confusing to me. Is it possible you could do a post for us 'dummies' explaining exactly how we buy shares through Choiceplus? Although I've stopped my paid employment, I haven't changed my super to the retirement phase - because I want to keep paying into it as long as I'm able. That was another option I didn't realise I had until I sought advice. I'm sharing this question with you via your public space because other folks may be wondering the same things. Thanks Phil, for your always sage advice. Where would we be without you?

    1. Hi Sally, I know we chatted off-line about all this, but for the benefit of readers here are some points. Some of the best LIC's are MLT (Milton), ARG (Argo), WHF (Whitefield) and BKI as they hold lower percentages of resource and REIT stocks which can be very volotile. I have left off AFI Cas it hold both of these - however it is still a wonderful LIC and worth holding. Always buy below NTA - be patient and wait for this price drop. Holding several good LIC's means that usually one of them is trading below NTA or offering a DSSP to take advantage of when your savings have reached a sensible amount to invest.
      Investing outside of super means you can access the earnings at anytime and have full control over them as assets - inside super, they are locked away at least till preservation age but you get better benefits of full franking inside super whilst you are earning a wage. It is a personal choice based on your circumstances.
      I am working on holw to do a video on how to use Choiceplus trading platfom - I'll need some time but!! :-)
      If you have stopped working but your significant other has not, it is worth them at least placing $$ into your Super so you get the free government bounty each year - it is money for nothing so you may as well. Delaying moving your super to pension mode until you actually truly need it certainly has many advantages as long as you are still contributing or your partner is contributing to it is some way.
      Anyway - I am not a financial adviser so always do your own research and make sure you always understand a concept thoroughly before making your own decision. I just love starting the education process for our readers.

  2. Thank you for sharing your thoughts and knowledge on this topic. This is really helpful and informative, as this gave me more insight to create more ideas and solutions for my plan. I would love to see more updates from you.

    Tax Advisor

  3. Hello, if we select DRP will we still get that 15% refund?

    1. Under current Australian taxation rules for Super - yes.


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