Investing outside of super now half as profitable as inside super
Did some math on the impact of the new 30% minimum floor (which I think is wild), plus CGT based on inflation (which I think is fairer) and the impact it will have on investing issue of super v outside of super.
Let’s assume one wants to invest 30k in one single year on a salary of 100k.
Outside of super
To do this outside of super, you'd pay about 14k in income tax (30% plus 2% Medicare levy) to earn this 30k portion. So an effective pre-tax value around 44k.
Investing this for 15 years outside (assume 7% growth, 2.5% inflation) grows to 83k on which you'd need to pay roughly a 12k exit tax on the capital gain with the new 30% tax.
This leaves you with around 71k in future dollars (or 49k in today's dollars)
So you’d be paying roughly 26k in tax (mix of today and future $) and 30k capital cost, to "make" a real return of $19k over 15 years.
Compare this to inside super.
Inside Super
One would need to salary sacrifice or contribute 44k pre tax which would be the equivalent impact of 30k reduction in take home pay. Assume you have built up unused cap space or invest over financial year cutoffs.
15% tax on that upon investing in super means roughly 37k invested.
After 15 years that grows to 103k. No sales tax on exit.
This is about 72k in today's dollars.
The difference
19k return for 30k capital and 15 years v 42k return for 30k capital investment.
Crazy difference.
With the old rules there would be practically zero tax paid (maybe 1-2k, or zero if split between a couple) on the outside of super amount (if retired with no income) making it basically equivalent.
Now it's half as viable.