The Association of Superannuation Funds of Australia (ASFA) has urged Australians to invest their tax returns in super, saying that taking advantage of compound interest and tax deductions will reward them in their retirement.
Each year Australians receive a total of $25 billion in tax refunds from the Australian Tax Office. ASFA said that the best way to maximise returns from this is by investing it in superannuation, as it affords benefits from both compound interest and tax deductions.
Changes to tax law effective from 1 July 2017 make individual contributions to superannuation tax deductable, subject to an annual contribution cap. This means that it is now possible to ‘double up’ tax returns by using them to make a tax-deductible contribution to superannuation.
“As tempting as it can be to splurge your tax return on short-term indulgences, it really makes sense to set it aside for your future, via super,” ASFA chief executive officer, Dr Martin Fahy, said.
The benefits of compound interest also help maximise tax returns if they are invested in super. ASFA said that if a 35-year-old put their tax return of $1,400 into super each year, they would have an extra $65,000 by retirement at 67.
Fahy said that the magic of compound interest was compelling.
