Super vs ETF Investing Tool
Super or ETFs? Compare the long-term growth of investing in superannuation versus an ETF to make the smartest choice for your goals.
Quick Use Samples
Investment Details
Super Balance
$182,506
ETF Balance
$210,716
Investment Projection
Pros & Cons of Investing in Super
- ✔ Low Tax Environment: Earnings are taxed at a maximum of 15%, which is a significant saving for most people.
- ✔ Forced Savings: The money is preserved for retirement, helping you build a nest egg without temptation.
- ✘ Accessibility: Your funds are locked away until you reach preservation age (usually 60).
- ✘ Limited Control: While you can choose investment options, you don't have direct control over individual assets unless your fund offers a direct investment option.
Pros & Cons of Investing in ETFs
- ✔ Flexibility & Access: You can access your money at any time, making it suitable for goals other than retirement.
- ✔ Full Control: You have complete control over your investment choices and timing of buying/selling.
- ✘ Higher Tax: Earnings are taxed at your marginal tax rate (with a CGT discount for long-term holds), which is higher than the super tax rate.
- ✘ Discipline Required: The flexibility can be a downside if you're tempted to dip into your investments for non-essential spending.
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What Is a Super vs. ETF Investing Tool?
This tool compares the potential long-term growth of investing money into your superannuation versus investing the same amount in an Exchange Traded Fund (ETF) outside of super. It highlights the differences in tax treatment for contributions, earnings, and withdrawals between the two environments.
Behind the Formula
The calculator runs two parallel investment projections. For the super pathway, contributions are taxed at 15% upfront, and earnings are taxed at 15% annually. For the ETF pathway, the investment is made with after-tax dollars, and earnings are taxed at your marginal tax rate each year (with a 50% discount for capital gains held over 12 months). The tool compounds the growth in both scenarios to show the difference in the final net outcome.
Expert Insights
- The tax environment of superannuation is deliberately designed to be the most effective retirement savings vehicle. For most people, the 15% tax on contributions and earnings is significantly lower than their marginal tax rate, leading to superior long-term growth.
- The main advantage of ETFs is accessibility. You can access your money at any time, whereas super is 'preserved' until you reach preservation age. This flexibility comes at the cost of higher taxes on your investment earnings.
- It's not an 'either/or' decision. A common strategy is to first maximise concessional super contributions up to the annual cap, and then invest any additional savings into ETFs or other investments outside super.
Actionable Tips
- Use this tool to see the powerful impact of the different tax treatments. For long-term goals (like retirement), the tax advantages of super are very hard to beat.
- If your investment goal is short to medium-term (e.g., a house deposit in 5-10 years), an ETF is likely more appropriate as you cannot access your super for this purpose (except under the First Home Super Saver Scheme).
- Consider your risk tolerance. Both super and ETFs involve investment risk. The underlying assets (shares, property, etc.) are often very similar; it's primarily the 'tax wrapper' that is different.
Real-World Examples
Long-Term Retirement Savings
A 30-year-old invests an extra $10,000. The calculator shows that after 35 years, the amount inside super could be worth over $50,000 more than the same amount in an ETF, purely due to the lower tax on earnings compounding over time.
High-Income Earner
For a high-income earner on the top marginal tax rate, the tax difference is even more stark. Earnings in an ETF are taxed at 47%, while in super they are taxed at only 15%.
Flexibility vs. Growth
Someone wants to save for a sabbatical in 10 years. While the super option projects a higher balance, the ETF option is the correct choice because the funds can be accessed when needed for the trip, unlike the preserved super funds.
Glossary of Terms
ETF (Exchange Traded Fund)
A type of investment fund that is traded on a stock exchange. ETFs typically track a specific index, sector, or commodity, and offer a diversified, low-cost way to invest.
Concessional Contribution
A pre-tax contribution to your super fund (e.g., salary sacrifice), which is taxed at a low rate of 15%.
Marginal Tax Rate
The rate of tax you pay on the last dollar you earn. Investment earnings outside of super are taxed at your marginal rate.