Superannuation can be tricky, especially when it comes to understanding how taxes affect your retirement savings. Taxes can slowly chip away at your returns over time, making a big impact on how much you’ll have when you retire. That’s why choosing a super fund that’s not only smart with investments but also tax-efficient is so important. Let’s break down how super is typically taxed, why direct investment ownership can offer tax benefits, and how Stockspot Super is designed to be a tax-efficient option.
How super is taxed in Australia
In Australia, superannuation is taxed at three main stages: when contributions are made, while your investments grow, and when you withdraw your super. Contributions made to your super from your employer (or salary sacrifice) are typically taxed at a concessional rate of 15%, which is lower than most people’s income tax rate. As your super grows, the earnings on your investments (like interest, dividends, and capital gains) are also taxed at 15%. However, if you hold an asset for over 12 months, you may receive a discount on capital gains tax, reducing the rate to 10%. Finally, when you retire and start drawing from your super, your withdrawals may be tax-free if you’re over 60 and meet certain conditions. This system is designed to encourage Australians to save for retirement while offering tax benefits compared to other types of investments.
How tax works in pooled super funds
Most traditional super funds are pooled funds, meaning all members’ investments are combined into a single pool. While this model offers some benefits, it can also lead to tax inefficiencies that may cost you.
In a pooled fund, tax liabilities like capital gains tax (CGT) are shared across all members. This means that even if you didn’t sell any investments, you might still end up paying tax on capital gains triggered by other members’ actions. For example, if another member withdraws their super, the fund might need to sell assets, generating capital gains that all members are responsible for, even if you haven’t made any changes to your own investments.
Another issue is that pooled funds don’t let individual members control when assets are bought or sold, which can lead to tax consequences that don’t always align with your personal financial situation. Frequent trading within pooled funds can also lead to short-term capital gains, which are taxed at higher rates, eating into your returns.
How Stockspot Super is different
Stockspot Super takes a more personalised approach through separate accounts, which helps minimise the tax issues often found in pooled funds. With Stockspot, you have your own separate account, so tax liabilities are tied directly to your own investment actions, not those of other members. This structure ensures a fairer and more tax-efficient outcome since you only pay taxes on the gains or income generated by your investments.
Having control over your investment decisions also means you can manage when to trigger taxable events. For example, you might decide to hold off selling an asset until it qualifies for a lower CGT rate, giving you more flexibility to manage your tax bill.
Many traditional super funds don’t offer this kind of clarity. In pooled funds, it can be hard to know exactly how your investments are being taxed, and you might not be able to predict when tax liabilities will arise. Stockspot’s approach eliminates that uncertainty, giving you full visibility into your tax situation.
Why ETFs make Stockspot Super tax-efficient
Stockspot Super uses Exchange Traded Funds (ETFs) to build your investment portfolio. ETFs are generally more tax-efficient than actively managed funds because they have lower turnover rates, meaning they buy and sell assets less frequently. This reduces the number of taxable events, helping you avoid unnecessary taxes that can eat into your super.
Another benefit of ETFs is transparency. They tend to be more straightforward with how they treat taxes, so it’s easier to understand the potential tax impact of your investments. By investing in ETFs, Stockspot can help you manage your super in a more tax-efficient way, keeping more of your returns working for you.
Tax-effective rebalancing
Stockspot Super also manages your portfolio with tax efficiency in mind. Periodic rebalancing helps ensure your investments stay aligned with your long-term goals, but it’s done in a way that minimises the impact of capital gains taxes. By carefully timing trades and rebalancing decisions, Stockspot ensures your portfolio remains balanced without unnecessarily triggering taxable events.
Why Stockspot Super is a smart choice for tax efficiency
By choosing Stockspot Super, you’re opting for a tax-efficient way to grow your retirement savings. Avoiding the inefficiencies of pooled funds and embracing a strategy built around low-cost ETFs and personalised tax management helps you keep more of your returns over time.
The individual account structure means you have more control over your tax outcomes, and Stockspot’s focus on transparency ensures you always know where you stand. Whether you’re focused on growing your retirement savings or protecting what you’ve already accumulated, Stockspot Super’s tax-efficient approach ensures that more of your money works for you – not the taxman.
When will Stockspot Super be available?
We are looking to launch Stockspot Super in late 2024. Join the waitlist to get early access. When we launch to the public, a PDS will be made available on the Stockspot website and you should read this as well as other relevant disclosure documents before making any decision to open an account.
