The new tax rules continue to puzzle investors. Financial advisers and other professionals aren’t much further advanced in trying to work out how best to respond to them either.

The new thirty per cent minimum tax on realised capital gains above inflation starts next July. It is assumed everyone will pay more tax. The majority will, but some people won’t, and it’s difficult to work out.

The likely outcome is dependent on the circumstances of the investor and the investment, both of which vary greatly, and the unknown future inflation rate.

Super funds are unaffected. They remain very tax efficient and now become even more attractive for savers and investors.

The limits on super contributions are generous. Up to $32,500 per year including employer super guarantee payments, can be saved into super, with a tax deduction allowed for it. That’s enough to accommodate a healthy savings plan. Up to four times that can be put in without a tax deduction.  

The money in super funds is inaccessible to some people. How much of a problem is that? Well, we cannot take it out and go buy a fancy car. We can’t take a world trip with the money. And we cannot pay the kids school fees with super savings.

However, if we don’t plan to do those things with our savings, access isn’t such a problem. The full balance is available if age sixty and retired, or from age sixty-five. Ten per cent of the balance is cashable each year from age sixty by starting a pre-retirement pension.

The main reason to save and grow our super may be to fund a comfortable retirement. However from age sixty we can draw from it to pay children’s university costs, help with their house deposits, or other things.

Some super funds allow members a lot of control over their investments. They are administration systems with a huge range of investment options. Savers can focus on their favourite area, including property if they wish. They can choose nearly any larger company share in Australia or overseas.

If that doesn’t give enough control and investment choice people can set up a self-managed super fund.

Those funds can no longer borrow to buy residential property but can still borrow for commercial and rural property. So investors can set up a self-managed fund and buy a small industrial or commercial property, funded largely by borrowings.

Super funds can also buy investments with gearing (borrowing) built in, to boost returns. There are geared managed funds that invest in shares, property and other growth assets. The returns will be accelerated by the gearing just as if the super fund had borrowed itself.