All of those entities can also be used for general investing activities, but one of the most tax effective ways of holding investments is through a superannuation fund.
There are a number of types of superannuation funds, but the most common are:
- retail and industry superannuation funds
- self-managed superannuation funds
The benefits of holding investments in a superannuation fund include:
- the income earned by investments is taxed at a low rate of 15%
- investment income is tax free when in “pension phase”
- there is a possibility of an individual making deductible contributions to the superannuation fund, which may be tax effective
Disadvantages of holding investments in a superannuation fund include:
- self-managed superannuation funds are expensive to establish and maintain
- the individual may have little or no say in the investments made by a retail or industry fund
- the investments belong to the superannuation fund and should not be used by the individual
- investments in superannuation funds (and their proceeds), are not readily accessible as they are required to be held until preservation
The laws regarding superannuation are varied and complex – please note: you should consult a superannuation specialist before establishing a self-managed superannuation fund or before making any significant superannuation investments, you should also consult a licensed financial planner to assist with your investments – I can provide referrals if you need to know who to talk to!