OLDER super members wanting to boost their retirement savings can make after-tax contributions to their super fund of up to $150,000 a year. "I think the non-concessional contributions are still worthwhile because of the 15 per cent on earnings inside super," Biti says. "If you invest anywhere else in your own name, you pay marginal income tax rates."
Insurance or investment bonds can be a good option, she says. They are a tax structure under which the bond pays tax at 30 per cent. To get the maximum benefit, the bonds have to be held for 10 years, after which no tax is owed. Investment bonds offer a range of asset mixes in which to invest.
Biti says there is likely to be renewed interest in gearing by those restricted by the caps. Investors would only want to borrow to invest in an asset that is likely to give good capital growth over time, she says.
That's because tax on capital gains on investments held for at least a year is levied at half of the investor's marginal income tax rate. There may be some tax benefits from negative gearing where income from the investment does not cover the interest costs and other expenses of holding the investment.
"People will look at gearing again," Biti says, adding that borrowing to invest can be good as long as the main motivation is not about reducing tax.