Negative gearing is not the only way to get a sizeable tax deduction and in fact more people should look at making extra concessional contributions to their super.
At least that is the view of HLB Mann Judd’s wealth management partner Jonathan Philpot who said super contributions were a much lower risk strategy to build wealth.
“Compared to a negative gearing strategy, that’s a higher risk strategy than superannuation which is lower risk,” he said.
Mr Philpot said many wealth builders or those with extra cash funds wanted to build wealth but in a way that was tax effective.
“Getting a tax deduction is high on the priority list. Most people think negative gearing is the only way to get a sizable tax deduction going forward,” he said.
However, people do not realise the benefit that super offered to them and that had led to a slow pick-up of the strategy, said Mr Philpot.
“If you look at someone earning $100,000 a year, compulsory super there’s little under $10,000 and that means they can put in a $15,000 contribution which is quite a significant tax deduction,” he said.
There was the obvious downside of the money being locked away, but Mr Philpot said that property was hardly a liquidable asset.
“The downside of putting more into super is it being locked away until retirement or aged 60 and you don’t want all your investment wealth tied into super and not have it accessible.
“But property is also an illiquid investment generally and you really have to own property for a long period of time to get some decent sort of returns generated on it,” he said.
Mr Philpot anticipated that the strategy around super would continue to grow as people saw its benefit.
“This strategy will start to build in popularity particularly for those that are out of high mortgage level,” he said.
It required people to be educated and understand their investments, said Mr Philpot, as it was unlikely to become mainstream conversation.
“Overall, the idea of putting more into super is a better way to go about it and get into the investment side of things. Unless people are proactive and seeking advice, contributions to super aren’t mainstream talk,” he said.
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