A superannuation fund is an investment vehicle, rather than an investment. Many fund members, journalists and even investment analysts are confused about this distinction. For example, asking whether property or super is the better investment is the wrong question. The right question to ask, is whether the tax savings offered by a super fund structure justify shifting some, most or all of your savings into a superannuation fund.
It is not uncommon for individuals who don’t understand how super works, to make comments such as: ‘Shares are a better investment than super’, or ‘Property is a better investment than super’. A superannuation fund is not an investment: rather it is a structure — a tax-effective investment structure.
The tax incentives that make superannuation attractive as a savings and investment vehicle, are also the same features that make super so complex.
Essentially, a superannuation account is an investment account that you cannot access until a certain age (and/or you satisfy certain conditions), which is generally taxed at a lower rate than most Australians pay in income tax. For lower-income earners however, superannuation also offers some incentives, such as the Low Income Superannuation Tax Offset (more a tax compensation measure than an incentive) and the Co-contribution Scheme.
Due to the many tax incentives associated with superannuation, there are special age-based rules in relation to accessing super, when contributing to super, retiring age, and claiming the Age Pension (see SuperGuide article Superannuation rules: What applies at different ages?). Due to superannuation being a lifelong investment vehicle, the opportunities to take advantage of the different incentives associated with super may vary over a working life, and also into retirement.