Tax | Slack Investor

Housing is tough for the young

In a November 2025 report, Cotality state some pretty depressing numbers for aspiring young home owners – using median Australian values.

The reported housing to Australian household income ratio of 8.2 is even worse when you consider housing in terms of the more meaningful disposable household income. This is the household income after deductions for tax, Medicare and existing loan payments.

There was a period in the late 1990s when it would take 9 or 10 years of annual disposable income to buy the average Australian dwelling. On average, it now takes 16-17 times disposable income to buy a residence.

Average residential dwelling price vs annual household disposable income – Greg Jericho – The Australia Institute

It is not just homebuyers feeling the squeeze. Renters are also in pain because the high cost of housing means that property investors are asking for a fair return on their investment.

The median household required a record 33.4 per cent of its income for rent, which was well above the average of the past two decades. _{– Jason Dasey – ABC News}

The chart below shows the effect on house prices after a series of Australian Government initiatives that have just seemed to add to the housing unaffordability problem in Australia. The dwelling prices have been accelerating away from household income since 1990.

Chart showing rapid increase in dwelling prices compared to Household disposable income since 1970 – Greg Jericho, The Guardian

It’s just Unfair

Matt Grundoff from The Australia Institute outlines the absurdity of the current system using the example of a highly paid executive who just has made a $400 000 profit on an investment property. Because of the Capital Gain discount, the profit will be taxed at 50% of the executive’s marginal rate – 50% of 47% = 23.5%. Contrast this with a full-time retail worker on the minimum wage (~$50 000) who will pay 32% tax on any extra shifts. Why should the retail worker pay tax at a greater rate than the executive?

The incentives are driving high net worth individuals into the property investing market. Currently, 60% of the Capital Gains discount goes to the top 1% of earners – on salaries of more than $362 900!

Today, the capital gains tax discount appears in the federal budget as a tax expenditure worth more than $20 billion a year. _{– Luke Hopewell – Switzer}

Something is in the wind

On fairness grounds, something must be done to tackle this dire current housing situation for the young. Slack Investor has never been in the position where a massive 45% of his income was required to service a mortgage. Likewise, in his younger days, he has never had to provide 33.4% of household income for rent. It is no wonder that Roy Morgan found that 23.9% of mortgage holders were ‘At Risk’ of ‘mortgage stress’ in January 2026.

There are enough balloons going up to signal that the Australian Government is going to look at the Capital Gains discount in the 2026 Budget. In the way of compromise, they will probably just reduce percentage amount of the discount to owners of multiple properties. This is a delicate matter, as a more drastic change might spook any property investors out of the market – and worsen the already tight rental scene.

Be Old and Get Gifts – December 2025 End of Month Update

Portrait of an Old Man – Rembrandt Van Rijn – Harvard Art Museum

Slack Investor would have to say that getting old has several disadvantages. However, the Australian government is compensating for this – perhaps a little too much. Under the current ‘Intergenerational contract’ and our ‘tax transfer’ system – it pays to be old!

25 years ago, the 75+ age group’s post-tax income was only 75% of the average, but now it matches the average, indicating a significant shift. _{–(Source: ANU)}

The Black line on the chart below, represents the net value (aggregate) of government taxes and services at each age. It is a good demonstration of how the Australian tax and transfer system works. A recent ANU Report shows that these transfers are part of the intergenerational contract where the working community ‘looks after’ the young and the old:

The Australian tax and transfer system – (Source: ANU). The intergenerational contract is graphically displayed – the black line is the net value of government taxes and services at each age.

When people are young, they pay relatively little tax and they receive services such as education.
During working age, people typically pay more in taxes than they receive in services.
After retirement, older Australians usually receive more in government benefits and services (age pension, aged care and health care) than they pay in taxes.

These principles are sound in a caring economy. However, there is something profoundly wrong with the whole Australian tax system where:

Australians over the age of 60 have enjoyed a post-tax income similar to that of mid-career working age Australians and much higher than Australians aged 18-30 _{–(Source: ANU)}

The report describes how, in earlier periods, older Australians earned relatively little income while the tax and transfer system provided income and support. In recent years, Australian retirees generally have generated income from significant Real Estate and Superannuation accumulated wealth – and the Australian tax and transfer system has not adjusted.

We’re a country that overtaxes hard work that actually contributes to the economy and rewards those hoarding unproductive assets while contributing little back. _{– Tom Stelzer, Livewire}

The Australian Budget is in a structural deficit – the cash balance will be negative in every year going forward! In the next few years, it will be necessary to increase taxes or reduce Government spending.

The ANU Report suggests that budget repair should include both a mix of tax increases and spending reductions on older Australians. The proportion of over 65s paying tax has halved in the last 20 years. Slack Investor is not one to eagerly put his hand up for extra taxes – but he can see the community benefit. He will take it on the chin when it happens.

December 2025 – End of Month and Year Update

Although December in the US was a flat month (S&P 500 +0.0%), there was a bit of a ‘Santa Rally’ this month for Australia and the UK. The ASX 200 was up 3.3% and the FTSE 100 up 2.2%. Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.

I haven’t yet done the full maths on the market yearly gains that include dividends. In raw terms (without dividends), for calendar year 2025 the ASX 200 was up 7%, the FTSE 100 up a magnificent 21%, and the S&P 500 up 16%.

Amongst all this positive news, the Slack Portfolio has had a negative calendar year and is down 3.1%. Slack Investor has good long-term performance and accepts the volatility of the stock market. He is not surprised by the odd bad year, but amongst all this background rising tide – it is just poor form!

The Ashley Owen graphic below shows one of the reasons for the Slack portfolio negative performance is that he has attached himself to some of the biggest losers of calendar year 2025 (CSL -35%, Goodman Group -17% and Wisetech -41%). My New Year’s resolution is to pay a bit more attention to the Slack Portfolio and try to turn things around.

The ASX top shares movement till 12 Dec 2025 – From Ashley Owen IFPA lecture series – OwenAnalytics

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

A technical note on the Slack Portfolio. Slack Investor has moved his Wesfarmers (WES) and Coles Group (COL) shares out of the growth-oriented Slack Portfolio because of their relatively weak projected growth (5%-10%). He remains a shareholder of these solid companies, but he has moved them into his Stable Income Fund – where they more comfortably sit.

Small Things

Slack Investor is enjoying the hallmarks of the festive season and has collected a ‘grab bag’ of smaller finance issues that just wouldn’t make a whole post. So, here they are as a collection.

Revised Division 296 Super Tax

Slack Investor wasn’t the only one going on a bit of a rant about the poor design of the proposed tax on large super balances – Division 296.

There was an unusual change of heart within the government after many months of stonewalling. The Division 296 proposal to tax both ‘realised’ and ‘unrealised’ gains on superannuation balances over $3m was finally revamped. The Australian treasurer Jim Chalmers relented. The new revisions are not law yet and are expected to be presented, and passed, in early 2026 with an implementation date of 1 July 2026. The changes from treasury outlined below are practical and sensible – and include indexation on the balance limits.

Superannuation earnings attributable to balances between $3 million and $10 million will be taxed at an effective rate of 30% (i.e. the existing 15% rate plus the additional 15% Division 296 charge).
Earnings attributable to balances above $10 million will face a 40% rate.

Slack Investor sees this as a welcome change of heart and a testament to the many persistent voices in the superannuation community that pointed out the flaws in the initial proposal. It is not often that Slack Investor is pleasantly surprised by a proposed tax outcome.

Yes, the S&P 500 is currently expensive

Slack Investor is a fan of using the forward adjusted S&P 500 Price/Earnings ratio (CAPE) to evaluate market value. Another way of looking at how expensive the S&P 500 is currently – is through a whole market yield analysis. When the overall market yield is high, this indicates that the market is cheap, lower yield (dividend) values represent an expensive market.

The median dividend yield value for the S&P 500 is 2.83%. The Mid-December 2025 value is 1.14%. This is approaching the lowest point in the 60 years that the chart represents.

Payday Loan Sharks

Slack Investor’s pre-Christmas bliss was interrupted by a cheery ad on SBS offering a loan from Cash Converters … with no fees!

I thought this was very decent of the Cash Converter’s crowd to help out this way – because in finance world we are always trying to reduce our fees and transaction costs. A search down to the details revealed that, sure, there were ‘no fees’ but there was an ongoing interest charge of 48% on amounts owing!

Interest is charged at a fixed rate of 48% per annum on the total outstanding balance _{– Cash Converters}

Admittedly, these loans are unsecured but in an environment where the comparison rates for various products are typically:

Home Loan: 4.8% – 6.5%
Personal Loan: 5.8% – 22%
Credit Card: 8.0% – 22%

These interest rates would seem outrageous! ‘Cashies’ are not alone in this space with the heavily advertised Wallet Wizard offering a 47.8 % loan interest and Nimble puts the screws in for 47.6%. There are many other harmless sounding short term loan providers with similar products, e.g. Swoosh, Sunshine, CashTrain, etc.

Slack Investor knows that there is a market for these payday loans to help manage unexpected bills and was glad that there is some form of regulation of this sector through ASIC. There was a big push to introduce protections in 2013 but these regulations applied specifically to loans less than $2000. Further regulations were introduced in 2022.

However, it is time to sharpen the ASIC regulation again, and with a few more teeth. Payday lenders are now pushing punters into the less regulated area of loans greater than $2000.

In the meantime, if you are in desperate need of cash in a hurry – try to avoid these payday loan sharks and apply for no interest loans through a charitable organisation like Good Shepherd. To get out of a debt trap you often need help and government-funded debt counsellors can provide this.

For an entertaining comedy/drama on Payday Lenders, Bank of Dave 2: The Loan Ranger is recommended – based on a true story (Netflix). Slack Investor offers festive greetings to all.

The Minutia of Investing – Portfolio Tracking and Tax Reporting

Slack Investor has just finished the inputs for his family tax returns and our SMSF tax return. All Good – and he was pleased that it was a painless procedure. After many years of investing, he has got himself organized.

A lot of the tax-time pain has been erased because of his disciplined rituals. As soon as he gets a communication about his shares (usually email) it is downloaded to one of Slack Investor’s Finance folders on his PC. The Finance folder has two sub-folders one for Transactions (Buy/Sell contract notes from Brokers) and, another for communications from Share Registries labelled DIVIDENDS_TaxStatements. He then saves items in these folders with specific notation Account_StockSymbol_Type of document_Date of issue (YYYY-MM-DD). For Tax Statements, Slack Investor will allocate the date for the end of tax year that the statement covered. After completing tax returns, Slack Investor will archive the files to the folder for the previous tax year – and start again for the current year.

Slack Investor’s Portfolio Tracking

Microsoft Money Sunset

Slack Investor will also enter any transactions or income events into his portfolio tracking software. He uses the retired but excellent (and free) ‘Sunset’ International English version of Microsoft Money downloaded from Gareth J. M. Saunders site. There is also a UK Version, and a US Version.

To automate share price updates it is necessary to use a service like MSMoneyQuotes. The latter is not freeware but the $US10 lifetime licence is money well spent. MS Money is now a 20-yr old bit of software and is a bit clunky but there is a good installation guide at TechFinitive that will help you through – including some registry changes to work with windows 10/11. Slack Investor loves MS Money, and the many support sites, e.g. View from the Potting Shed which has a free support pdf available, Ameridan’s Blog and moneymvps.org. He has been using versions of MS Money for 30 years!

For those who don’t want to wander through the complications of the Microsoft Money path, it is really important to track your portfolio for capital gains and performance, and at least some sort of portfolio tracking is recommended. Slack Investor cannot stress this enough. The ATO will want information when you sell stocks. They require your sell date and price, and the harder to find, buy date and initial cost of your shares/ETF’s – in order to calculate any capital gains tax. This procedure can get complicated when you buy shares in different lots or, participate in a dividend re-investment program as the ATO require a cost-basis for each parcel. It will make your life easier if you have a portfolio manager or, at least, a capital gains tracker.

Portfolio Tracking with Monthly Fees

For Australians, the slickest products involve an annual/monthly cost as good financial software requires constant development.

Sharesight

A highly-rated financial portfolio tracker that includes tax statements and capital gains tracking for $228 annually for one portfolio or $348 annually for up to 4 portfolios. Sharesight used to have a free version that included tax reporting for one portfolio with under 10 shares. However, they have now dropped tax reporting privileges for free accounts.

Navexa

Another nice looking and highly-rated product. A financial portfolio tracker that includes tax statements and capital gains tracking for $240 annually for one portfolio or $300 annually for up to 3 portfolios.

Snowball

This is a US-based portfolio tracker so it will not help greatly with your Australian tax reporting. However, it is a highly-rated and a good looking way to track your Australian and US shares for around $130 AUD annually for one portfolio or $230 AUD annually for up to 10 portfolios.

Finance Tracking without Monthly Fees

Down at the budget end we have products that require a bit more work. There are a few other alternative finance products that are discussed in Whirlpool – but Slack Investor presents a few solutions below.

Yahoo Finance

This is a very basic tracker that can track your overall portfolio performance if you enter your buys and sells and dividends manually. Slack Investor uses Yahoo Finance to keep an eye on the day to day movements of his portfolio plus watchlists. There is no tax reporting or help with capital gains, but Yahoo Finance is a free portal to track your portfolio and it will have your buy and sell information in one place.

Stock Profit

An excellent free alternative to portfolio tracking is the google sheets based Stock Profit. There is a bit of a effort in setting it up but it will track your performance and capital gains with ease. This really is a good product.

Capital Gains Tracker

If you are not worried about portfolio tracking you will make your life easier at tax time if you have some means of tracking capital gains and the free web-based but locally stored cgtracker will supply you with capital gains information and tax statements. Capital Gains Tracker is free to use but you must enter all your buy/sell information.

Personal taxes and Mytax

Firstly, a ‘Hats Off’ to the ATO who have made their online tax returns (MyTax) a very simple process with the ‘pre-filling’ of wages, dividends and distributions. Slack Investor usually waits till September to allow all the pre-filling documents time to trickle in to the ATO. It is now incredibly easy to fill in a tax return yourself and only those with very complex tax affairs should need an accountant.

If your tax affairs are relatively straightforward, MyTax is a fast, free and effective way to lodge your return online. It puts control in your hands, provides instant access to pre-filled information, and helps you get your refund sooner. _{– Tax Window}

By September, all of Slack Investor’s personal tax information was pre-filled, including the distributions from ETF’s that often have internal capital gains and foreign income. He had additional capital gains from share selling and opted to use their Capital Gains Worksheet which was part of MyTax – it already had the small ETF internal capital gains prefilled and he just had to add buy dates and costs for each lot of shares sold. Slack Investor had all of this information on MS Money – but any capital gains tracker would have this information in one place. For advice on any problems with MyTax, he went to the ATO community rather than the official ATO site – which often has opaque, or vague, solutions to your problems.

SMSF Tax Return

Slack Investor started the process in October when his provider (Esuperfund) prompted him to allocate categories to each of the transactions for his SMSF Bank account. All the dividends and distributions were pre-filled but he needed to label the type of contributions (concessional/non-concessional) and the relevant member of the SMSF. Also, he had to determine from which pension account any withdrawals came from. There was some head scratching to make sure the minimum amount withdrawal requirement (5% age 65–74, 4% age under 65) from each pension account had been fulfilled.

Slack Investor had to assure Esuperfund that he hadn’t bought any exotic assets outside of their monitored banks/brokers. He also had to upload Tax Statements from each of the ETF’s in the SMSF portfolio. Luckily, they were all in one place in my Dividends_Tax Statements folder. He submitted the checklist and now have to wait a long ~7 months – till May 2026. By which time, Esuperfund will have obtained an Auditor’s review and will present the trustees with the 2025 SMSF Tax Return to sign.

Tax Issues

The Tax Collector (1883) – Samuel Edmund Waller

OK … the certainties are death and taxes … Right, that’s fine. But, at least there is some discretion over taxes. Who knew that it is quite an interesting subject. The rate which a country levels its business tax can have a profound effect on its economy.

Slack Investor is in Ireland at the moment and, can’t help reflecting on the role of tax incentives and the incredible effect on the Irish economy of the establishment of a Special Economic Zone in Dublin in 1987.

The transformation was accelerated when Ireland’s standard corporate tax rate was reduced from 40% to 12.5% (phased in from 1996 to 2003). _{– wikipedia.org}

It should be noted that Australia’s corporate tax rate is 30%, and in the US, 21%. Because of the Irish tax changes, this made Ireland a ‘Tax Haven’ and a wave of international companies set up entities in Ireland. These include Apple, Alphabet, Facebook, Microsoft, Oracle and Pfizer.

Multinationals move $16bn from Australia to tax havens each year _– _From_{theguardian.com}

There are all sorts of complicated tax minimization strategies with exotic names such as the Bottom of the Harbour, the Double Irish, the Dutch Sandwich, etc. Tax authorities are always trying to shut these down, but fighting a tough uphill battle.

The simplest way that multinationals minimize tax is to shift profits from a high corporate tax country to a low taxing country. This is usually done by charging the Australian branch exorbitant licensing or management fees from the parent company.

Microsoft, which took $6.3 billion from Australian customers during fiscal 2021-22, told the ATO that 93.6 per cent of that was not taxable _{(due to charging a licence fee and shifting profits to Ireland! – edit Slack Investor)}– ultimately paying just $120.28 million, for an effective tax rate of 1.9 per cent of gross profits._{– From Information Age}

Australia is attempting to fight back with new Tax Transparency Laws that will make companies disclose their transactions on a country basis. There is also an Australian/OECD push to enforce a 15% global minimum tax in the countries where revenue is earned.

Slack Investor applauds these efforts but the multinational accountants are cunning bastards!

The Tax Mix

The image below shows, on a country basis, what the percentage of total tax receipts can be attributed to: Personal/Individual Income, (Dark Blue), Corporate Income (Green), Social Insurance Taxes (Gold), Property Taxes (Light Blue), Consumption Taxes (Black), and Other (Brown).

Click for better resolution – From Tax Foundation report 2024

It is clear that, if Australia wishes a tax structure closer to the OECD average, it has to reduce Personal and Corporate Tax and increase Social Insurance taxes (these taxes are specific to a future benefit (e.g. Pension, Disability, etc). Also, in order to make our tax system more sustainable, a priority must be to increase consumption taxes from the relatively low rate of 10%.

Both major parties must work together to achieve tax reform. I sincerely hope that this can happen. But, it will take a group of politicians with a long term view. Good luck with that!

Australian Super – Division 296 revisited

While on the subject of tax, Slack Investor will have one last rip on the proposed new superannuation tax. There has been lots of media about the Australian Government proposed, seemingly inevitable, new super tax. On the legislative agenda is a Division 296 tax on superannuation balances over $3m. Slack Investor has already had a spray about this. Slack Investor knows that there is a need to tax those with big super balances.

There should be incentives to provide for your own retirement but agrees with the Government, that once you have enough money to fund your retirement, all concessions must start to taper off. Slack Investor objects to the design of the proposed tax, it is to be applied to unrealized gains and the caps are to be not indexed.

There is already an indexed cap on the tax-free Pension accounts of $2m (2025). In the eyes of Slack Investor, this amount is plenty for a comfortable retirement. If your pension fund earns just 5%, this is an annual income of $100K. Any extra super can go in your Accumulation account which is currently taxed concessionally at 15%.

The problem is, that there are some super accounts with huge balances that are taking advantage of this Government generosity.

The 2020-2021 data reveals the number of Australians with super balances over $50 million has increased to 135 people_{– From ABC News.}

A Better Way

How about we forget about this silly unrealized gain business and we keep the current $2m (indexed) restrictions in place for the pension accounts to provide for a good retirement income. To raise revenue, the Government should introduce higher taxes on any actual gains in super balances left over in the Accumulation account for super balances over $3m (Indexed). These taxes could be between 15% and 30%.

This would raise some money without the complications of unrealized gains. Everyone should be happy!

Free Australian Tax Gifts

Slack Investor was taught to appreciate gifts and … who doesn’t get a little bit excited when they encounter free stuff. Australia offers many lifestyle advantages to those who live here. The Australian Government also offers a few financial tax gifts … for free!

Capital Gains Tax

A capital gains tax is usually applied to the profit made from selling an asset (usually property or shares). The tax can be seen as a reasonable part of the Australian income tax system (personal earnings + business earnings + capital gains). The tax is applied in the tax year of the capital gain at your marginal tax rate – although there is a 50% concession for assets held more than 12 months.

Your own home – A ‘Partial Tax’ Gift

Slack Investor is across the difficulty of owning your own home these days – yet, it is one of the major financial goals to achieve before retirement.

There is no tax for any capital gains on your principle residence in Australia. As those lucky enough to be in the property market, tend to change houses every 11.3 years (9.6 years for units), there are opportunities to passively increase your property stake without incurring any Commonwealth taxes.

However, the cash strapped state governments have got their hands on this free gift by applying Stamp Duty (Tax) to property purchases. These stamp duties can be substantial, For a $700K dwelling , a non first home buyer will pay around $25K (NSW, Vic, Qld, Tas), and over $30K in some states/territories (SA, NT).

Your Super after 60 – A ‘Solid Gold’ Tax Gift (for now)!

For most people, an income stream from superannuation will be tax-free from age 60 – _{MoneySmart.gov.au}

Contributions and the earnings of your super fund are usually taxed, though this may be at a concessional rate. While saving your superannuation, it sits in an Accumulation account. When you retire, you can transfer some (or all) of that money into Retirement phase – an Account-based Pension. For FY 2025, the ATO have set a transfer balance cap (TBC) (limit) of $1 900 000 that can be transferred into retirement phase and remain tax free.

Up to the TBC limit – all earnings (Dividends, Distributions, Capital Gains) from your retirement phase Account-based pension are not taxable – This is a great gift to retirees!

Using the Super Balance Detective calculator from Superguru, you can see exactly how your super balance is tracking. ABC News have an excellent article How does my super compare to others? where references are made to the ASFA ‘comfortable retirement’ standard. All of these sources were used to make the following chart to measure how your current super balance measures up for retirement.

The Red line was generated as a track towards a $1.9m super balance at retirement. Although the red line super numbers are, admittedly, ‘heroic’. Readers of Slack Investor would always like to aim high for an independent retirement – and try to get at least towards the $1.9m in super at retirement that will maximize this tax-free gift.

A chart to see if you are on track for a ‘Comfortable’ Retirement (Yellow Line), or on a path for maximum allowable tax-free income (Red Line). The Red Line was calculated using an earnings figure of 6% p.a. The Green and Blue Lines are the average amounts of super that Men and Women have (ATO Figures 2021) – Click image to enlarge.

Thanks to compulsory super, people with a solid employment history will be on track to have a super balance for a ‘Comfortable’ retirement (Yellow Line). This comfortable retirement definition assumes that you own your own home and have access to the full (or part) aged pension.

Using the 4% rule, a $1.9m super balance at retirement will generate a $76 000 tax free income each year. This would be a ‘Very Comfortable’ retirement – but there may be a few changes in the wind.

But Wait … Division 296

This all sounds too good to be true … You’re right! The legislators are coming after this gift.

The Australian government is considering a very muddled legislation known as Division 296 – which aims to target large superannuation balances. They reference Total Superannuation Balance (TSB) for this proposal. The sum of any accumulation accounts plus any pension accounts. The legislation is currently held up in the senate.

Division 296 tax is imposed at a rate of 15 per cent on a percentage of earnings equal to the percentage of superannuation balances that exceed $3 million – _{treasury.gov.au}

The concept behind this is very reasonable. Slack Investor doesn’t object to the idea of tax on large super balances. Super should ultimately be all about funding your own retirement – and not be used as a tool to preserve wealth for your estate.

However, in a sensible world, some amendments to the current form of the bill should be made. They include:

The $3 million threshold for the application of Division 296 needs to be indexed
In its current form, Division 296 unusually proposes taxation on unrealised gains – rather than being based on the actual taxable income. This is a first for the Australian tax system – it does not make sense and needs to be rectified.

First Home Super Savers Scheme (FHSSS)

After discussing how hard it is for those trying to buy their first home. Slack Investor is compelled to provide some hope in the desire to own your home before you retire. The numbers are in … and, not owning a house in retirement or, losing your job before you retire, puts you at real risk of not reaching a comfortable financial position.

Whereas very few retired home owners are in poverty, most retired renters are …
Helen Hodgson – Professor, Curtin Business School

From – Retirement Income Review Final Report (2020)

There are very few existing incentives on the dusty twisted road to home ownership. They include Stamp Duty exemptions/concessions that vary from state to state. In Victoria, they are available for homes less than $750K. There is also the First Home Buyers Grant (FHBG), which, again, is dependent on which state you live. In Victoria, that comes in at a measly (but I’ll take it!) $10K.

All of these things are worth considering and applying for when you finally purchase a home, but the First Home Super Saver Scheme (FHSSS) is a lesser known arrangement that seems to make sense – but it requires a bit of “setting up”.

In order to make the most of the FHSSS, you’ll need to start planning well ahead of the time to buying a house/apartment (3 – 4 years?) – But planning ahead is the very trait that Slack Investor loves!

First Home Super Saver Scheme (FHSSS)

I did refer to the First Home Super Saver Scheme (FHSSS) way back in 2017 when it was just a twinkle in ScoMo’s eye – it started as an election promise to get the “young folk” on board as the government felt a need to at least be seen to be doing something to help first homeowners.

Normally, your super is a beautiful one-way savings vehicle where your retirement money is locked away, and compounding, until you meet a condition of release or, when you reach your preservation age. For most people, the big taxation benefits kick in after the age of 60 – but that’s another story.

However, the treasure chest of the FHSSS, is opened when you first start to make some extra super contributions (up to $15K per year).

These voluntary contributions can be withdrawn from your super when you finally ready to purchase a home – by filling out an ATO form for a ‘determination’. The determination will tell you exactly how much you can withdraw – it will be a little more than you have put in (your contributions – up to $50K – plus deemed earnings)- and waiting a month.

Getting the money out usually takes 15–25 business days … once you withdraw money to buy a house, you have one year to use it
Choice – First Home Super Saver Scheme: Can it help you get on the property ladder?

These extra contributions are over and above the compulsory super that your employer makes. The scheme works by making an arrangement with your paymaster to salary sacrifice into your super – up to $15K per tax year. Contributions can also be made by arranging with your super provider to make a personal super contribution.

The tax savings come about as, you only pay 15% tax on these super contributions – rather than your marginal rate of say, 32.5%. Plug in your own details into this calculator to determine your possible tax savings.

There are complexities and limitations that include not exceeding your concessional contribution cap of $27,500 – but your super provider will help here.

I would recommend all prospective home owners to take a look at this scheme. Assessment for eligibility is made on an individual basis … so couples and friends can combine their amounts – but start now – it will take a few years to get a useful house deposit.

Colonial First State outline a case study of a couple that have each started voluntary extra super contributions of $15K – After 15% tax this comes down to $12 750 p.a of contributions into their funds. After 4 years, they each have amassed $55K (4 x $12 750 plus deemed interest). A combined house deposit of $110K was possible using the FHSSS – and, using a favourite Slack Investor way of saving – deductions from your salary before you even see it! All of this with tax advantages.

Homework (get it!): – Potential homeowners – read about it – and get on the FHSSS!

Sacrifice

The Self-sacrifice of a father – Jacques Sablet (French, 1749–1803)

Slack Investor likes a bit of old art – and a picture that tells a story really floats my boat. But firstly, a bit of recognition to the fabulous Artvee site that gathers public domain files of artworks from around the world from galleries and museums.

This Jaques Sablet oil painting depicts a father returning home with a bandaged arm – where he reveals some loaves of bread to his hungry family. He has previously allowed a trainee surgeon to extract his blood in exchange for money.

Not suggesting a blood sacrifice is required these days for a loaf of bread – but a form of sacrifice that could help you on your journey to financial independence is Salary Sacrifice.

Salary Sacrifice

The key to tax-effective salary sacrifice is for the employee to take some of their remuneration in the form of concessionally taxed benefits instead of taking it all as fully assessable salary.
H&R Block

Australia has a progressive tax system that steps up at critical income values. The advantages of salary sacrifice are that you are buying a benefit in pre-tax dollars in an arrangement with your employer – who takes out the money before you see it. For example, if you sacrifice some of your pre-tax salary for superannuation contributions – instead of being taxed at your marginal rate, you are being taxed at the superannuation contributions rate of 15%. There is a tax saving.

Australian Residents Personal Tax Rates 2023-2024

Taxable income	Tax on this income
0 – $18,200	Nil
$18,201 – $45,000	19c for each $1 over $18,200
$45,001 – $120,000	$5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000	$29,467 plus 37c for each $1 over $120,000
$180,001 and over	$51,667 plus 45c for each $1 over $180,000

The above rates are from the Australian Tax Office (ATO) and do not include the Medicare levy of 2%. There are defined things that you can “sacrifice” and pay for with pre-tax dollars. They include car expenses (loan, running costs and parking) and superannuation.

Salary Sacrifice For Superannuation

Slack Investor has always been a good saver and would save up and pay cash for a second-hand car rather than getting a car loan. The benefits of sacrificing salary for a car were small without the a car loan element. I did however see the advantages in sacrificing part of my salary for superannuation.

United Global Capital (UGC) provide the case study for worker William aged 45 who plans to retire in 20 years. He was given a pay rise of $5,000, bringing his total salary to $90,000 pa. Rather than pocket the gain, he uses the pay rise to boost his retirement savings and salary sacrifices the extra $5,000 salary into super each year

By using this strategy, he’ll sadly have less take home pay ($3275), but he will save on tax and have an extra $975 in the first year to invest into super, when compared to receiving the $5,000 as after-tax salary (see Table 1).

The real benefits are in the disciplined automatic saving of $5000 per year and the magic of compounding over 20 years. If he continued to salary sacrifice this amount into super, this could lead to William having an additional $228,500 in his super after 20 years (see Table 2).

You can enter your own salary details using the Industry fund salary sacrifice calculator.

There is also another advantage of salary sacrifice – for getting into the property market using the Australian Government First Home Super Saver Scheme. It has some complexity and form filling – but it does allow you to load up your super with salary sacrificing and then withdraw up to $50 000 from your super as a first home deposit.

There are drawbacks to salary sacrifice … the main one being that even though there is an overall benefit to your wealth position – it is not realised till you retire and start using your superannuation – this may be many years away. Your overall take-home pay will immediately reduce – which is a tough ask in these higher prices times.

Slack Investor is no stranger to delayed gratification and loves to automate his savings … so salary sacrificing to super was a good strategy for me and my partner. There was always competition for funds with paying off my home loan – and, I never got to using the maximum amount allowed for salary sacrificing per year (Currently $27 500 per year) … but it was always my aim.

Salary sacrifice was a worthwile element in the Slack Investor path to financial independence.