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Thursday, 12 July 2018

How to get a government guaranteed return of 1000% on an investment*

Now that DS1 has turned 18, he could get an effective return of 1000% simply by making an undeducted contribution (after-tax) into his superannuation account this year of $2. This is because the Super co-contribution paid to low-middle income earners has a minimum amount of $20.

However, as the maximum co-contribution amount of $500 will be paid if DS2 makes a contribution of $1000, I'll make sure I give him that amount to put into his superannuation account this FY (while he might get a job to earn some money during the summer vacation, I doubt his top priority will be to lock some of that money away until his retirement!). Even with a return of 'only' 50% is well worth making the effort. And, with around 50 years to benefit from compound interest and a superannuation tax rate of 15% on investment earnings, the $1500 added to his superannuation account balance at age 18 will have a significant effect on the amount he has available to fund his retirement.

* of $2

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