A smart way to use superannuation as a vehicle to invest is to use the equity available in your home for cash flow purposes. As you may or may not know, there are significant tax benefits in depositing as much as you can into your superannuation (different benefits depending on your tax bracket). One the most effective ways to use superannuation if you are getting taxed quite a bit, is to put as much of your pre-tax earnings into superannuation as you can, and then use the overdraft facility on your home loan to draw down cash for living and day-to-day expenses. This is really not a complex strategy, but it is one that is very simple if your economic situation allows for it. 

A lot of people get shocked at the thought of drawing down and increasing the size of their home loan. Don’t be. The savings may actually shock you.

If your salary allows for it (always check with your financial planner) then the tax breaks that you could achieve by throwing as much of your salary into super as you can will far outweigh the interest repayments that you have to make from drawing down on your loan. The most important aspect with the aforementioned strategy is that your very carefully ensure that you manage the amount of money you are drawing down upon from your home loan. The best way to manage this would be to setup direct transfer arrangements to put your salary back into the position it would be normally – this will ensure that you wont “overspend”.

Stupid, stupid, stupid Tim – no way would I do this now with the Market Crisis?

It’s actually not all that stupid. There is nothing stopping you changing superannuation funds or lowering your expected return threshold. All superannuation funds have low, medium and high growth divisions and depending on your risk preference – you will be in one of them. World markets are going to recover, and don’t think that a lot of smart people in superannuation funds don’t already know this. They are already licking their lips as perfectively good companies are being hammered by the current market conditions. When the current conditions blow over, profits are going to skyrocket from so called “bargin basement deals”.

Remember, Superannuation really is a great vehicle to use to “force” yourself to save. Next time you have a meeting with your financial planner, throw this strategy at them and see what they say.