For high-income Australians approaching retirement, optimising superannuation and investment strategies is critical to ensuring financial security and a comfortable lifestyle. With children nearing
school completion and mortgages almost paid off, there is a unique opportunity to focus on wealth
accumulation and tax-effective retirement planning. This paper outlines essential strategies to
maximise superannuation benefits and investment returns before reaching retirement.
Maximising Superannuation Contributions
1.1 Concessional Contributions
Salary Sacrifice: Redirecting a portion of tax income into superannuation to take advantage of the
concessional 15% tax rate (compared to higher marginal tax rates). This is particularly beneficial for
individuals in the highest tax brackets (45% plus Medicare levy), as it offers significant tax savings.
Personal Deductible Contributions: Making additional tax contributions up to the concessional cap
($30,000 per year as of 2024-25).
1.2 Non-Concessional Contributions
After-Tax Contributions: Utilizing the annual non-concessional cap of $120,000 or leveraging the
bring-forward rule to contribute up to $360,000 in a single financial year (subject to total super
balance limits). This is advantageous for individuals who have received an inheritance, sold a
property, or accumulated excess savings.
Spouse Contributions: Contributing up to $3,000 for a spouse earning below $37,000 to receive a full
tax offset of up to $540. This helps balance superannuation assets between spouses, reducing the
tax burden in retirement and maximising government incentives.
1.3 Government Co-Contribution
High-income earners with eligible lower-income spouses may benefit from co-contribution
incentives where applicable. While not directly applicable to most high-income earners, this can be
useful for family wealth planning.
If your spouse is earning under $45,400 in the 2024-2025 financial year, and you make an after-tax
contribution of $1,000, the government pays up to $500 into their superannuation funds as a co-
contribution.
1.4 Catch-up Contributions
If your superannuation balance is less than $500,000 on 30 June 2024, you may be eligible to make
additional tax-deductible contributions. This is principally available where you have not contributed
your maximum allowable tax-deductible contributions over the past five years. There is an
advantage when you or your spouse have returned to the workforce or made a large capital gain
during the year.
Superannuation Investment Strategies
2.1 Reviewing Asset Allocation
Growth vs. Defensive Assets: Adjusting asset allocation to balance risk and return based on the
investor’s time horizon and risk appetite. Generally, those nearing retirement should gradually shift
towards lower-risk investments, such as bonds and cash, while still maintaining some exposure to
growth assets for long-term capital appreciation.
Lifecycle Strategies: Considering gradually shifting towards lower-risk investments. Superannuation
funds often offer pre-set investment options that adjust risk exposure as retirement approaches.
2.2 Self-Managed Superannuation Funds (SMSFs)
Evaluating whether an SMSF provides better control and flexibility over investments, including direct
property, equities, and alternative assets such as private equity.
Complying with regulatory and cost considerations to ensure viability: While SMSFs provide
flexibility, they require administrative effort and must comply with strict regulatory requirements,
making professional advice essential.
Investment Strategies Outside of Superannuation
3.1 Diversification Across Asset Classes
Equities and ETFs: Leveraging a mix of Australian and global equities for long-term capital growth.
Exchange-Traded Funds (ETFs) provide a cost-effective way to access diversified markets.
Property Investments: Exploring opportunities in residential or commercial real estate for rental
yield and capital appreciation. Consideration should be given to gearing strategies, tax deductions,
and potential capital gains tax implications.
Fixed Income and Bonds: Balancing risk with secure income streams from fixed-interest investments.
Corporate and government bonds can provide stability and predictable returns.
3.2 Tax-Effective Investment Structures
Family Trusts: Structuring investments through discretionary trusts for income splitting and tax
advantages. This is particularly useful for managing capital gains tax and distributing investment
income among family members in lower tax brackets.
Investment Bonds: A tax-effective strategy for long-term savings outside superannuation with a 10-
year investment horizon. These offer benefits for high-income earners looking for a tax-efficient
vehicle outside of superannuation limits.
Negative Gearing: Using borrowed funds to invest in assets (such as property or shares) where
interest expenses and ongoing property costs exceed the property rent received, providing a tax
deduction. This strategy can be effective but should be carefully managed to ensure long-term
viability.
Pre-Retirement Strategies
4.1 Transition to Retirement (TTR) Strategy
Using a TTR pension to supplement income while continuing to work, reducing taxable income, and
maximising super contributions. This allows for a more gradual shift into retirement while benefiting
from superannuation tax advantages.
4.2 Downsizer Contributions
Contributing up to $300,000 per individual ($600,000 per couple) from the sale of a primary
residence, if aged 55 and above, into superannuation without affecting contribution caps. This can
significantly boost retirement savings and provide greater financial flexibility.
Estate Planning Considerations
Superannuation Death Benefit Nominations: Ensuring binding death benefit nominations are up to
date to ensure assets are distributed according to wishes.
Testamentary Trusts: Structuring estate assets efficiently to protect wealth and minimise tax for
beneficiaries. Testamentary trusts provide asset protection and potential tax savings for heirs.
Intergenerational Wealth Transfer: Planning for the seamless transfer of wealth to children and
grandchildren while minimising tax implications. This includes strategies such as gifting, structuring
investments in tax-effective vehicles, and leveraging superannuation withdrawals effectively.
Risk Management and Insurance
Reviewing Life and Income Protection Insurance: Ensuring adequate insurance coverage is in place,
particularly for high-income earners with dependents.
Total and Permanent Disability (TPD) Insurance: Providing financial security in case of serious illness
or injury, often held within superannuation for tax efficiency.
Long-Term Care Planning: Considering the potential need for aged care services and associated
costs, which may impact retirement savings.
Conclusion
With thoughtful planning and strategic decision-making, high-income Australians can maximise their
superannuation and investment portfolios to secure a financially independent and tax-efficient
retirement. Seeking professional financial advice tailored to individual circumstances is essential for
optimising these strategies in line with evolving legislation and personal financial goals. By taking
proactive steps today, individuals can ensure a secure and prosperous retirement, making the most
of their accumulated wealth and financial opportunities.
Should you require further information about maximising your superannuation, please feel free to
contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an
obligation-free appointment.
The information in this document does not consider your personal objectives, financial situation or needs, so you should consider its appropriateness regarding these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision, and it is recommended that you seek assistance from your financial adviser.