The Nest Egg or the Nest?

The Great Australian Dream-to own your own home. To be debt free upon retirement.

But is it more tax effective to allocate additional mortgage repayments into your superannuation?

Advantages of making additional mortgage repayments

  1. Achieve security of owning your own home
  2. Flexibility- as many home loans allow you to re-draw additional repayments
  3. Interest payable saved by making additional repayments

Advantages of making superannuation contributions

  1. Tax effective environment- with earnings and concessional contributions taxed at a flat rate of 15% opposed to your marginal tax rate.
  2. Building your retirement nest egg.
  3. Upon retirement a lump sum of your superannuation can be withdrawn to completely pay off your mortgage, thus allowing you to be debt free at retirement.

It is important to consider:

  • Are you comfortable with a higher level of debt over the long term
  • Superannuation is not accessible for most people until the age of 60
  • What is your marginal tax rate? The higher the income the greater the tax savings within superannuation.

Have any thoughts on this topic? Please leave us a comment below.

Jessica Waller