Unit 3
Financial Independence
PART 2
Unit 3: Financial Independence
What is financial independence?
How much is needed?
How can I achieve it?
What are some common strategies?
The superannuation system
Making contributions into super
Drawing an income from super
Withdrawing funds from super
Consolidating your super
Investment options
Super strategies
Part 1 Part 2
General Advice Warning
The content of this Unit is not personal financial advice for you
It covers general principles
… taught as part of university course based on the Australian system.
It does not take into account your situation, objectives or needs.
You are responsible to consider whether it is suitable
… for your personal circumstances.
You should consider obtaining financial and tax advice yourself.
Making Contributions Into Super
0200,000
400,000
600,000
800,000
1,000,000
1,200,000
20 30 40 50 60 70 80 90
Focussing on the accumulation phase here …
Accumulation Phase
Age
Super
Income tax rates don’t help with saving!
Australian Taxation Office (2025), ‘Individual income tax rates’ on ato.gov.au (website)
Taxable Income Marginal Tax Rate
0 – $18,200 Nil
$18,201 – $45,000 16%
$45,001 – $135,000 30%
$135,001 – $190,000 37%
$190,001 and over 45%
The above rates do not include the Medicare levy of 2%
Let’s assume
a marginal tax
rate of
30%
Income
$100
Bank account
$70
$85
Superannuation
$70
30%* Income Tax
– $30
15%**
Contribution Tax
– $15
Contributions visualised
Non-concessional
contributions
(after-tax) 0% tax
Concessional
contributions
(before-tax)
* The above Income Tax rate does not include 2% Medicare Levy (for simplicity). There is no Medicare Levy on Contribution Tax.
** The Contributions Tax rate reduces to 0% if income is below $37,000 p.a. via Low Income Super Tax Offset (LISTO)
Limits for concessional contributions
These are ‘before income-tax’ contributions
Including employer Super Guarantee contributions or salary sacrifice contributions
Contributions tax rate is 15% rather than paying marginal tax rate plus Medicare Levy
Concessional Contribution Cap (maximum): $30,000 per year
Any contributions above the cap taxed at marginal income tax rate plus Medicare Levy
Can carry-forward unused cap over 5 year rolling period if super balance < $500k
High income earners may pay an additional Division 293 Tax of 15%
The Division 293 threshold is $250,000 p.a. based on combined income and contributions
This is still lower than the highest marginal tax rate of 47% (including Medicare Levy)
Personal after-tax contributions (with deductions) limited if aged 67+
Age 67 to 74: must work 40 hours in consecutive 30 day period. Age 75+: not allowed.
Employer and salary sacrifice contributions still allowed until age 75 with no work test.
Australian Taxation Office (2025), ‘Contributions caps’ on ato.gov.au (website)
Australian Taxation Office (2025), ‘Division 293 tax on concessional contributions by high-income earners’ on ato.gov.au (website)
Limits for non-concessional contributions
These are ‘after income tax’ contributions made from bank account
Including funds released by selling other investments and moving the funds into super
Super account balance must be below Transfer Balance Cap ($2 million)
Non-concessional Contribution Cap (maximum): $120,000 per year
Age restrictions:
Age < 75: may be able to ‘bring forward’ 2 years of caps and contribute up to $360,000
Age ≥ 75: not allowed
… although Downsizer Contribution still allowed after 75
Australian Taxation Office (2025), ‘Non-concessional contributions cap’ on ato.gov.au
The main ways to get money into super
1. Employer contributions
(including Super Guarantee Contributions)
2. Self-employed contributions
3. Salary sacrifice contributions
4. Personal after-tax contributions
(with deduction)
5. Personal after-tax contributions
(with no deduction)
6. Government co-contributions
7. Spouse contributions
8. Child contributions
9. Downsizer contributions
10.Sale of small business
1. Employer contributions (SGC)
Employers contribute percentage of ordinary time earnings into super
If they don’t, they are required to pay a charge to the ATO, which is paid to your super
Ordinary time earnings are just your wage or salary (excluding overtime and allowances)
Minimum requirements are Superannuation Guarantee Contributions (SGC)
These are changing over the next few years and are listed on the following slide
Most employers are required to allow you to choose your own fund
Some employers are exempted when subject to State Awards
They will allocate you to a default fund if you don’t make a choice
Concessional contributions subject to 15% contributions tax
Only for contributions below Concessional Contributions Cap ($30,000 per year)
‘Maximum super contributions base’ for high-income earners ($62,500 per quarter in 2025-26)
Contributions tax may be 0% if income < $37,000 p.a. due to Low Income Super Tax Offset (LISTO)
Super Guarantee Rates
From … SG Rate
1 July 2002 9.00%
1 July 2013 9.25%
1 July 2014 9.50%
1 July 2021 10.00%
1 July 2022 10.50%
1 July 2023 11.00%
1 July 2024 11.50%
1 July 2025 12.00%
Australian Taxation Office (2025), ‘Super guarantee percentage’ at ato.gov.au (website)
No more changes planned!
2. Self-employed contributions
Self-employed people are not employees of a business
They work for themselves as a sole-trader or under a partnership
… so they don’t receive Superannuation Guarantee Contributions (SGC)
… but can make their own concessional contributions themselves
1. Send a ‘Notice of intent to claim’ form to your super fund before end of financial year
2. Make personal contribution directly to the superannuation fund from bank account
3. Claim a tax deduction for the contribution in your Tax Return to the ATO
Australian Taxation Office (2025), ‘Super for sole traders and partnerships’ at ato.gov.au
3. Salary sacrifice contributions
Ask your employer to pay part of your salary into super (15% contributions tax)
… instead of paying it to you (marginal income rate of tax + Medicare levy)
Employer must be notified in writing before the income is earned
Concessional contributions (before-tax)
Are not eligible for government co-contributions
Are eligible for First Home Super Saver scheme (FHSS)
Popular with people approaching retirement (aged 50 to 74)
Under-utilised by young people who could benefit from long-term compound returns
Salary sacrificing can affect termination benefits under some contracts (watch out)
Age restrictions
Not permitted for those aged 75 or above
Australian Taxation Office (2025), ‘Salary sacrificing super’ at ato.gov.au
4. Personal after-tax contributions with deduction
Payments direct from your bank account into superannuation
… for which you do claim a tax deduction in your income tax return (15% contributions tax)
Concessional Contributions subject to Cap ($30,000 per year)
Note that Employer and Salary Sacrifice contributions are also included in this amount!
Popular way to increase super and reduce income tax
You must notify your super fund of your intent to claim a deduction and receive
NAT71121 Notice of intent to claim or vary a deduction for personal contributions
Usually eligible for First Home Super Saver (FHSS) scheme
Not eligible for Government Co-Contribution
Age restrictions
Age 67 to 74 you must satisfy ‘work test’ of 40 hours in consecutive 30-day period
Not permitted for those aged 75 or above
Australian Taxation Office (2025), ‘Claiming deductions for personal super contributions’ at ato.gov.au
5. Personal after-tax contributions with no deduction
Payments direct from your bank account into superannuation
… for which you do not claim a tax deduction in your income tax return
Non-Concessional Contributions subject to Cap ($120,000 per year)
$360,000 if bring forward 2 years (balance must be below Transfer Balance Cap $2 million)
Popular with people approaching retirement (aged 50 to 74)
Sell investment property and invest proceeds into superannuation
Usually eligible for First Home Super Saver (FHSS) scheme
Age restrictions
Not permitted for those aged 75 or above
Australian Taxation Office (2025), ‘Non-concessional contributions cap’ on ato.gov.au
6. Government super co-contributions
A government ‘top-up’ of $0.50 for each $1 (up to $500)
of personal after-tax contributions (up to $1,000)
Income must be below $47,488 (2025-26) to get the full amount … and
1. Not claim a tax deduction on the personal contribution
2. Must earn >$1 wage income (must be >10% of total income) and lodge tax return
3. Not hold a temporary visa at any time in the financial year
4. Must be aged below 71 (no restrictions on children)
5. … a few other things (see ATO website)
ATO and super fund arrange it automatically
Possible strategy for spouses or uni students with casual work
Australian Taxation Office (2025), ‘Super co-contribution’ at ato.gov.au
7. Spouse contributions
Superannuation contributions on behalf of a low-income spouse
Sum of spouse’s assessable income, fringe benefits and super < $40,000
Spouse can be married or de facto and must be living together
Both you and spouse are Australian residents
Non-concessional contribution (after-tax)
Contributor is eligible for tax rebate (maximum $540)
Tax offset is calculated as 18% of the minimum of:
1. $3,000 minus spouse’s income over $37,000
2. The value of the spouse contribution
… tax rebate gradually reduces to zero as spouse’s income increases from $37k to $40k
Australian Taxation Office (2025), ‘Super-related tax offsets’ on ato.gov.au
Australian Taxation Office (2025), ‘Spouse super contributions’ on ato.gov.au
8. Child contributions
Infants and children can have superannuation accounts
Some superannuation funds will not permit infant accounts due to inability to sign forms!
Adults can make contributions into the child or infant’s accounts
Non-concessional after-tax contributions
No tax deductions can be claimed by the adults making the contributions
$50,000 can be withdrawn for First Home Super Saver Scheme (FHSS)
The annual contribution is still limited to $15,000 per year
… so the contributions need to be made over at least 4 years
Australian Taxation Office (2025), ‘First Home Super Saver scheme’ on ato.gov.au
9. Downsizer contributions
Contribute up to $300,000 from the sale of your home into superannuation
Home must have been owned by you or spouse for 10 years prior to sale
Can only be accessed once by people aged 55 years or older
… and still can be used by those aged 75 and above
An after-tax contribution made into superannuation (no tax on main residence)
Neither a non-concessional or concessional contribution
Does not contribute to Non-concessional Contributions Cap
Can still be made even if super balance is greater than Transfer Balance Cap ($2 million)
Does contribute to Transfer Balance Cap ($2 million) when moving super into income phase
Australian Taxation Office (2025), ‘Downsizer super contributions’ on ato.gov.au
10. Sale of small business
Rollover proceeds from sale of small business into superannuation
… and defer tax on up to $500,000 in capital gains
Details are complex (not covered in this course)
Australian Taxation Office (2025), ‘Small business CGT concessions’ at ato.gov.au
Summary of age restrictions for contributions
Contribution < 55 55 - 66 67 - 74 75 +
Employer SGC
(concessional contribution)
Yes Yes Yes Yes
Salary sacrifice
(concessional contribution)
Yes Yes Yes No
Personal after-tax (with deduction)
(concessional contribution)
Yes Yes
Work
Test
No
Personal after-tax (no deduction)
(non-concessional contribution)
Yes Yes Yes No
Downsizer
(special contribution)
No Yes Yes Yes
Work Test = Must work 40 hours in consecutive 30 day period
Income
$100
Bank account
$70
$85
Superannuation
$70
30%* Income Tax
– $30
15%**
Contribution Tax
– $15
Contributions visualised
Non-concessional
contributions
(after-tax) 0% tax
Concessional
contributions
(before-tax)
* The above Income Tax rate does not include 2% Medicare Levy (for simplicity). There is no Medicare Levy on Contribution Tax.
** The Contributions Tax rate reduces to 0% if income is below $37,000 p.a. via Low Income Super Tax Offset (LISTO)
Drawing an Income From Super
Recap: When can I access my super?
You must reach your ‘preservation age’ before you can access your super
The preservation age is currently age 60
Exceptions:
First Home Super Saver Scheme
Compassionate Grounds
Financial Hardship
and any emergency release programs (such as COVID-19 in 2020)
Australian Taxation Office (2025), ‘Accessing your super to retire’ at ato.gov.au
0200,000
400,000
600,000
800,000
1,000,000
1,200,000
20 30 40 50 60 70 80 90
Focussing on retirement income phase here …
Retirement Income Phase
Age
Super
Minimum pension payments based on age
Once a pension starts a minimum percentage of the account balance is
required to be paid each financial year
Australian Taxation Office (2025), ‘Payments from super’ at ato.gov.au
Age Percentage factors
Under 65 4%
65 to 74 5%
75 to 79 6%
80 to 84 7%
85 to 89 9%
90 to 94 11%
Aged 95 or older 14%
Transition to retirement (TTR) pension
You can access an income stream from super while you are still working
You must reach the ‘preservation age’ (60)
Must draw minimum of 4% each year if under age 65
Lump-sum withdrawals not allowed unless you permanently retire
The pension income that you draw is normally tax-free
Investment earnings subject to 15% tax rate
Australian Taxation Office (2025) ‘Transition to retirement rules’ at ato.gov.au
also called a ‘Transition to Retirement Income (TRI)
Account Based Pensions (ABP)
Allows you draw a regular income from super savings
… once you have reached preservation age and permanently retired
You can still make lump-sum withdrawals
If you are aged 60+ the income you receive is tax-free
Investment earnings are tax-free
Lump-sum withdrawals are usually tax-free
Maximum transferred into pension is Transfer Balance Cap ($2 million)
Anything above this must be kept in super accumulation phase (earnings taxed at 15%)
… or withdrawn from super completely
also called ‘Allocated Pensions’
Annuity
Pays a regular income regardless of market returns
Income can be linked to inflation
Term can be fixed or lifetime
Lifetime annuities can revert part of income to spouse upon death
Limited or no access to lump sum withdrawals
If you are aged 60+ the income you receive is tax-free
Investment earnings are not relevant
Maximum transferred into annuity is Transfer Balance Cap ($2 million)
Anything above this must be kept in super accumulation phase (earnings taxed at 15%)
… or withdrawn from super completely
Comparison of retirement income streams
TTR ABP Annuity
Preservation age  ✓ ✓
Must be permanently retired  ✓ ✓
Can easily make withdrawals  ✓ 
Income is tax-free (age 60+) ✓ ✓ ✓
Investment returns tax-free  ✓ ✓
Withdrawing Funds From Super
Why withdraw money from super?
Still have home loan payable upon retirement (unfortunate)
Don’t trust the government … get it all out! (bad reason)
Don’t trust the super funds … get it all out! (bad reason)
Health expenses
Retiring overseas (may still be better to leave it in)
Helping adult children (in 40s) reduce their debt
Helping grandchildren (in 20s) buy their first property
Lavish family holiday
Types of withdrawals
1. Withdrawals after age 60
2. Economic crises
3. First Home Super Saver scheme
4. Compassionate grounds
5. Severe financial hardship
6. Terminal medical condition
7. Incapacity
8. Super less than $200
9. Departing Australia
10. Divorce
11. Death
Recap: When can I access my super?
The earliest age you can access super is called your ‘preservation age’
The preservation age is currently age 60.
Exceptions:
First Home Super Saver Scheme
Compassionate Grounds
Financial Hardship
Emergency Release Programs (such as COVID-19 in 2020)
Australian Taxation Office (2025), ‘Accessing your super to retire’ at ato.gov.au
What is a ‘condition of release’ after age 60?
Not only must you achieve your preservation age (60) …
… you must also satisfy a ‘condition of release’
1. Permanently retire
2. Start a Transition to Retirement (TTR) pension
3. Cease work with an employer
… or reach age 65 (even if you have not retired)
Australian Taxation Office (2025) ‘Conditions of release’ at ato.gov.au
1. Withdrawals after age 60
Withdrawals from super after the age of 60 are often largely tax-free
Tax-free component 0% tax
Taxable (taxed) 0% tax
Taxable (untaxed) 15% tax up to a limit then 45%
… but you need to satisfy a ‘condition of release’
Such as ceasing work with an employer or permanently retiring
If you invest the funds outside the super environment
… then investment returns are assessable at marginal income tax rates
2. Economic crises
COVID-19 early release of super
$10,000 over each of the 2020 and 2021 financial years ($20,000 in total)
Withdrawals were tax free
Provided emergency financial slack to Australians in economic crisis
Could be repeated in future economic crises
3. First Home Super Saver scheme (FHSS)
Withdraw up to $50,000 to help buy your first home
Can only access $15,000 of contributions per year (so must have contributed at least 4 years)
Assessed individually … so couples can withdraw $100,000
Must be from either:
1. Salary sacrifice contributions (concessional)
2. Personal after-tax contributions with deduction (concessional)
3. Personal after-tax contributions with no deduction (non-concessional)
… NOT Employer contributions (concessional)
Withdrawal of concessional contributions for FHSS to buy first home
… pay marginal income tax rate less 30% tax offset when withdrawn
… save roughly 15% tax on savings channelled via super to buy first home
Australian Taxation Office (2025), ‘First Home Super Saver scheme’ at ato.gov.au
4. Compassionate Grounds
1. Medical treatment or transport for you or your dependent
2. Palliative care for you or dependent
3. Making payment on home loan or council rates so you don’t lose home
4. Accommodating a disability for you or your dependent
5. Expenses associated with the death, funeral or burial of dependent
Tax is payable on the withdrawals
Contact Australian Taxation Office
Australian Taxation Office (2025), ‘Early access to your super’ at ato.gov.au
5. Severe Financial Hardship
You must meet all of the following:
1. Unable to pay essential family living costs
2. Receiving income support payment for at least 26 weeks in a row
Not including Veteran Payment, ABSTUDY, Austudy or Youth Allowance as full-time student
Tax is payable on the withdrawals
Contact your super fund
Australian Taxation Office (2025), ‘Early access to your super’ at ato.gov.au
6. Terminal medical condition
1. Certified by two registered medical practitioners
One must be a specialist
2. Illness likely to result in death within 2 years
Withdrawal is tax-free
Contact your super fund
Australian Taxation Office (2025), ‘Early access to your super’ at ato.gov.au
7. Temporary or permanent incapacity
Temporary incapacity
Unable to work due to physical or mental medical condition
Can generally access insurance within super
Super is received as regular payment (income stream)
Normal tax
Permanent incapacity
Permanent physical or mental medical condition
Can receive super as lump-sum or regular payment (income stream)
Concessional tax
Contact your super fund
Australian Taxation Office (2025), ‘Early access to your super’ at ato.gov.au
8. Super less than $200
Your employment is terminated and balance is below $200
No tax is payable
Contact your super fund
Australian Taxation Office (2025), ‘Early access to your super’ at ato.gov.au
9. Departing Australia super payment (DASP)
Temporary visa holders can withdraw super upon leaving Australia
DASP ordinary tax rate is 35%
Contributions tax of 15% was also paid
Total tax paid is 50%
Australian Taxation Office (2025), ‘Departing Australia superannuation payment (DASP)’ on ato.gov.au
10. Divorce
Super assets are included in the ‘asset pool’ distributed in a divorce
Family Court can order super funds to pay part of super to ex-spouse
Note: Relationship counselling is usually cheaper than a divorce!
11. Death
Your super is held ‘in trust’ by the super fund on your behalf
It is not directly owned by you so you cannot give instructions via your will
Trustee of fund is obliged to pay super to your financial dependents
If none can be found, it will be paid to your estate
You can nominate beneficiaries with your super fund
You can make ‘binding nominations’ but it must be to a dependent
Paid to a dependant for tax purposes: tax-free
Usually spouse (including de factor and same-sex) or child under 18 years of age
Paid to a non-dependant for tax purposes: taxed at 15% plus Medicare levy
Usually adult children or siblings
Australian Taxation Office (2025) ‘Paying superannuation death benefits’ on ato.gov.au
Consolidating Your Super
Multiple super accounts is not good
Duplicated account fees
Duplicated insurance
Duplicated premium
Duplicated paperwork
Risk of losing track of it
Stress from disorganisation
Super Stapling
You are ‘stapled’ to the first fund you sign up with
… or the fund you are with now.
So when you move jobs your super fund will ‘move’ with you
… unless you choose a different super fund.
You are not ‘stuck’ with the same super fund.
You can change fund whenever you like.
… commenced Nov 2021
Consolidating multiple accounts into one
1. Go to my.gov.au
2. Log in or create an account
3. Link your myGov account to the ATO
4. Select ‘Super’ and then ‘Manage’
5. Select ‘Transfer super’
This option will only appear if you have more than one super account
Moneysmart (Australian Commonwealth Government) (2025) ‘Consolidating super funds’ at moneysmart.gov.au (website)
When closing an account, watch out for …
1. Is an employer still making contributions into the old fund?
A few (not many) employers pay higher contributions into selected funds
Closing a fund that receives active employer contributions causes problems
Some employers don’t allow ‘choice of fund’
2. Will you lose insurance cover that cannot be replicated?
You may now have a ‘pre-existing medical condition’ that means you could lose cover
3. Bad behaviour from some ‘industry funds’
If they don’t have a signature on file or the name is slightly different they can be problematic
It can be a good idea to call your old funds before closing the account!
Searching for lost super
Superannuation funds are required to report ‘lost members’
They have not been able to contact you
They have not received any contributions or rollovers for 5 years
Your account was transferred from another fund as a lost member
The ATO keeps a ‘Lost members register’
1. Search online via MyGov (manage my super)
2. Call ‘Lost super search line’ on 13 28 65
3. Submit a ‘Searching for lost super’ form
Australian Taxation Office (2025) ‘Searching for lost super’ at ato.gov.au (website)
What jobs may not have paid super?
You were under 18 and worked less than 30 hours per week
… unless covered by an employer agreement (or your employer was generous!)
You were a ‘domestic worker’ and worked less than 30 hours per week
Examples or private domestic workers include a nanny, cleaner or gardener
Self-employed work (when you are not an employee of the company)
Australian Taxation Office (2025) ‘Work out if you have to pay super’ at ato.gov.au (website)
Investment Options
Three layers
Superannuation administrator
Fund manager Fund manager Fund manager
Asset Asset Asset Asset Asset Asset Asset Asset Asset
Investment alternatives
1. Investment options
Super fund chooses both asset allocation and managed funds
You choose between ‘conservative’, ‘balanced’, ‘growth’ …
Low fees but reduced choice and flexibility
2. Asset allocation
You choose asset allocation and super fund chooses the fund managers
You choose allocation between cash, fixed interest, shares, listed property …
Slightly higher fees in exchange for more choice and flexibility
3. Direct investment
You choose both asset allocation and fund managers (and sometimes specific shares)
You choose specific manage funds (or shares) from a large menu of options
Higher fees in exchange for maximum choice and flexibility
Should I invest in low-risk investments?
… these funds are supposed to fund retirement after all!
In Units 9 and 10 we will define ‘total risk’ as the volatility of returns
We will see that there is a trade-off between total risk and expected returns
Better to choose higher total risk below the age of 50
… and then gradually reduce investment risk levels after that
Asset categories
CMT is a Cash Management Trust. These are offered by investment banks such as Macquarie Bank and are popular with financial advisers
A ‘speculative investment’ is a euphemism for ‘gambling’. This is because they generate no cash flows. More on this in Units 9 and 10.
Asset category Asset category
1. Cash Transaction, Savings Account or CMT
2. Fixed Interest Term deposits, debentures or bonds
3. Residential Property Apartment, townhouse, duplex or house
4. Commercial Property Listed Property Trust
5. Australian Shares Australian Exchange Traded Fund (ETF)
6. International Shares Global Exchange Traded Fund (ETF)
Lower risk
Short time-horizon
Higher risk
Long time-horizon
Cryptocurrency (bitcoin), commodities (gold) and foreign exchange are speculative investments
Asset categories
CMT is a Cash Management Trust. These are offered by investment banks such as Macquarie Bank and are popular with financial advisers
A ‘speculative investment’ is a euphemism for ‘gambling’. This is because they generate no cash flows. More on this in Units 9 and 10.
Asset category Asset category Time horizon
1. Cash Transaction, Savings Account or CMT 0 – 1 years
2. Fixed Interest Term deposits, debentures or bonds 1 – 5 years
3. Residential Property Apartment, townhouse, duplex or house 5+ years
4. Commercial Property Listed Property Trust 5+ years
5. Australian Shares Australian Exchange Traded Fund (ETF) 5+ years
6. International Shares Global Exchange Traded Fund (ETF) 5+ years
Cryptocurrency (bitcoin), commodities (gold) and foreign exchange are speculative investments
Past returns are no indicator of future returns
Many investors look to the past to extrapolate to the future.
We will see in Units 9 and 10 that this is a very bad idea.
Expected future returns should be based on asset categories
… and not historical returns.
Asset categories real and nominal returns
These are assumed long-term future expected rates of return for this course. The derivation will be discussed further in Units 9 and 10.
Asset category Real return Inflation Nominal return
1. Cash 0.5% + 2.5% = 3.0%
2. Fixed Interest 1.5% + 2.5% = 4.0%
3. Residential Property 5.0% + 2.5% = 7.5%
4. Commercial Property 6.0% + 2.5% = 8.5%
5. Australian Shares 6.0% + 2.5% = 8.5%
6. International Shares 6.0% + 2.5% = 8.5%
Asset categories price gains and income
These are assumed long-term future expected rates of return for this course. The derivation will be discussed further in Units 9 and 10.
Asset category Price gains Income Nominal return
1. Cash 0.0% + 3.0% = 3.0%
2. Fixed Interest 0.0% + 4.0% = 4.0%
3. Residential Property 5.0% + 2.5% = 7.5%
4. Commercial Property 5.0% + 3.5% = 8.5%
5. Australian Shares 5.0% + 3.5% = 8.5%
6. International Shares 6.5% + 2.0% = 8.5%
Financial advisers like Wrap Accounts
… such as Macquarie Wrap
Provide many investment choices
Allowing tailored asset allocation and selection of assets to suit the client
Adviser fees can be deducted directly from investment returns
Easy administration and reporting across many clients
… at a cost of higher administration fees paid by the client.
and also ‘Managed Discretionary Accounts (MDAs)’
Super Strategies
1. Make additional contributions into super
Salary sacrifice at least 10% of your salary
… or make personal after-tax contributions and claim a tax deduction
Take advantage of long-term compounding of returns
Stay under the Concessional Contributions Cap ($30,000 per year)
Note that employer contributions are included in this cap
Problems
Also need to be saving for buffer, financial slack, future expenses
No liquidity … cannot access salary sacrificed contributions in emergency
… but you can access them to buy your first home
2. First Home Super Saver (FHSS)
Withdraw salary sacrifice or personal contributions to help buy first home
$50,000 per individual ($100,000 for a couple)
Only $15,000 in contributions from any individual year can be withdrawn to buy a home
… so need to have contributed over at least 4 years
Note that concessional contributions still pay tax
Pay 15% contributions tax rather than marginal income tax rate when you make contribution
Pay marginal income tax rate less 30% tax offset when withdrawn to buy first home
… so you effectively save 15% tax on any savings channelled via super to buy first home
Problems
Employer contributions cannot be used for FHSS
Tax advantaged returns may be replicated by borrowing to invest in diversified share portfolio
Low liquidity … can access for first home but nothing else (except for early release)
Australian Taxation Office (2025), ‘First Home Super Saver scheme’ on ato.gov.au
3. Invest in high-growth investment option
While under 50 … consider investing in high-growth option
Higher volatility (risk) in exchange for higher expected average return
Mainly Australian and international shares
Extra 1% per annum makes a big difference over 30+ years
4. Children’s super
Open a super account for each child when they are born
Ask grandparents to make small monthly personal after-tax contribution
… preferably made via a bank account under the child’s name
Take advantage of 60+ years of compounding
$50,000 can be withdrawn for First Home Super Saver (FHSS) scheme
Contributions should be made from a bank account in child’s name
5. Increase contributions once you reach 45
From age 45+ try to salary sacrifice
… or make personal after-tax contributions and claim a deduction
Watch out for the Concessional Contributions Cap ($30,000 per year)
This reduces income tax payable
Problems
At that age you have high living expenses from private school fees, food, holidays …
Mid-life challenges could result in career change or lavish purchases
6. Self-Managed Super Fund (SMSFs)
Create your own fund with 6 or fewer members
Before July 2021 SMSFs could only contain 4 or fewer members
Direct control over investments with more choice (including property)
Rules include ‘related parties’ or deriving benefits from assets (in-house assets)
Better control over tax when moving from accumulation to payment phase
Borrow to invest using limited recourse borrowing arrangement (LRBA)
Ability to transfer residual amounts to other fund members upon death
… but pretty high admin costs and an accountant needs to be involved.
Australian Taxation Office (2025), ‘Self-managed super funds’ at ato.gov.au
7. Super balancing
Attempt to equalise account balances for you and spouse
Spouse contributions
Super Splitting
An individual can split up to 85% of concessional contributions to a spouse
Receiving spouse must be under the age of 65
Non-concessional contributions cannot be split
Personal after-tax contributions
Sale of assets outside super … direct into spouse’s super account (subject to limits)
Helps to avoid breaching Transfer Balance Cap ($2 million)
8. Transition to Retirement (TTR)
Many interesting strategies here!
Continue working part-time after the age of 60 as long as possible
This will allow your super balance to continue growing
Salary sacrifice income above $45,000 into superannuation
Pay 15% contributions tax rather than 30% marginal income tax (plus Medicare levy)
Subject to concessional cap of $30,000 per year (but can be higher with unused caps)
Draw tax-free income from TTR pension to help cover living expenses
Net effect is to lower marginal tax rate to 15% + 2% Medicare levy
9. Sell investments outside super
Before retirement …
Simplify your investments by selling properties or shares outside super
Invest proceeds into super as personal after-tax contributions
Watch out for the Non-concessional Contributions Cap ($120,000 per year)
… or $360,000 in one year by bringing forward 2 years of caps
Watch out for timing of capital gains on sale of assets
Best to sell those assets in a financial year in which you are earning little other income!
10. Downsize home after age 60
After age 60, downsize the family home to a smaller one
You must have lived in the home for 10 years prior to sale
Downsizing contribution of $300,000 into super
For a couple, this is $600,000 in total
Watch out for Transfer Balance Cap ($2 million per person)
This is still available to those aged 75 and over

11. If all else fails … there is the Age Pension
Age Pension is a form of social security
Aged 67 or above for those born from 1 Jan 1957 onwards (from 1 July 2023 onwards)
The regular income can help your super to last a lot longer
There is both an ‘asset’ and ‘income’ test
There are limits on ‘gifting’ assets to others
There is ‘deemed income’ rates on investments
Receiving even $1 dollar entitles you to Pensioner Concession Card
Cheaper health care, medicines and other services
12. You will not live forever in perfect health
Plan to enjoy life, hobbies, voluntary work, family and grand children
Avoid complex super arrangements, tax structures and investments
Remember that your brain will age
More confusion, more human bias, less trusting, poor memory, possible dementia
Draw a regular income
Keep the next 5 years of pension payments in low-risk (fixed interest)
Keep the remainder in growth investments (shares and listed property)
Preferably use Exchange Traded Funds to avoid gambling
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Your Financial Plan
Apply what you have learned in this Unit for your financial plan:
4. Financial Independence
Describe you plan to achieve financial independence (preferably with calculations!)
Detailed description of how you plan to use super during accumulation phase
Detailed description of how you plan to use super during payment phase
More information under ‘Financial Plan Instructions’ document
… on the course website under ‘Financial Plan’ section
For assessment purposes …
You may assume that you are living in a different country
… but you must assume the Australian superannuation system applies in that country

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