posted in: Investment Advice

Should You Put Extra Money Into Super, Or Buy An Investment Property?

It’s one of the most common questions I get. You’ve got some surplus cash flow, you want to build wealth, and you’re weighing up where it should go. Should you tip more into superannuation, or use what you’ve got to buy an investment property? The honest answer is that it depends on you, your income, your capacity and what you’re actually trying to achieve. But once you understand how each option behaves, the decision gets a lot clearer.

In this article, I’ll walk through the main wealth-building options on the table, the tax benefit of concessional super contributions, what leverage does that super contribution alone can’t, and the real comparison between putting money into super and using your home equity to buy a larger asset. Then we’ll bring it back to how you actually choose.

There’s No Shortage Of Good Options

The starting point is recognising that most of the obvious moves are genuinely good moves. None of them are wrong. The trap is treating one of them as the answer before you’ve looked at your own numbers.

There are lots of things you can do that are good. Putting money into superannuation, particularly if you can put it in concessionally, is a tax deduction for you. So it can be quite effective depending on what income level you’re earning. Putting in non-concessional contributions is also a good idea. Buying shares is a good idea. Buying an investment property is a great idea. Paying off your home is a great idea as well. It’s about trying to understand what’s best for you.

That last line is the whole point. Every one of those options can build wealth. The work is figuring out which mix suits your situation, not crowning a single winner.

The Case For Extra Super Contributions

Let’s run the numbers the video uses. Say you’re 40, you’ve got a fairly small mortgage, you’re earning $150,000 a year, and you can put an extra $10,000 into super.

When that money goes into superannuation, you’ll get a tax deduction personally. You’ll get about $3,900 back from the ATO if you put $10,000 into super, and the super fund will pay 15% tax, so about $8,500 will go in.

So you contribute $10,000, you get $3,900 back personally, and after the fund’s 15% contributions tax, $8,500 lands in your super. The benefit isn’t just the balance going up.

The net benefit of that is more cash right across your whole group. You’ve got more in super, and whilst you’ve decreased the money you’ve got personally, you got that good tax deduction which was more tax back than the super fund paid. Great way to build some wealth, right?

That’s the quiet strength of concessional super. You got $3,900 back at your marginal rate, the fund only paid $1,500 in tax, and you’re ahead across the board. It’s clean and it’s efficient.

What Leverage Does That Super Can’t

Now here’s where it gets interesting. Super is efficient, but it only puts to work the money you actually contribute. Property can put to work money you don’t have yet.

What if we were able to leverage our own occupier property for a deposit on an investment property and go buy, let’s say, a million dollar investment property? That investment property after tax might cost you $10,000 a year.

So instead of $10,000 going into super, you use the equity in your own home as the deposit and borrow the rest. The holding cost after tax is around $10,000 a year. Yes, that’s a little more than the after tax super contribution, and that $10,000 is the after-tax number, so it’s real money out of pocket.

The Real Comparison: $8,500 Versus A Million Dollar Asset

This is the part that reframes the whole decision. It isn’t just the contribution. It’s what each of those dollars is controlling.

So yes, a bit more expensive than that super contribution, because that $10,000 is the after tax number, but you then get exposure to a million dollar asset compared to that $8,500 net amount that went into superannuation.

With the super contribution, your $8,500 is exposed to $8,500 of growth. With the property, a similar annual cost gives you exposure to a $1,000,000 asset. If that asset grows, it grows on the full million, not on what you put in. That is the power of leverage, and it’s the single biggest reason property behaves so differently to a super contribution.

It also cuts both ways. Leverage magnifies the downside as well as the upside, you’ve taken on debt against your home, and a property is far less liquid than a super balance. None of that makes it the wrong choice. It just means it carries more risk and more responsibility than tipping money into super, and that has to fit your situation.

So, Which One Is Right For You?

Here’s the honest answer: for most people it isn’t one or the other, and it’s rarely all of them.

There are lots of different good ideas and good things you can do, but take a step back and actually map out what you want to do, what your capacities are across the board, and let’s maximise a mixture of those choices.

Super is efficient. Property gives you scale through leverage but brings debt, risk and illiquidity. Shares, non-concessional contributions and paying down your home each have their place too. The right answer is the combination that matches your income, your appetite for risk, your time horizon and the life you actually want to fund.

Don’t pick the strategy first. Map out the picture first, understand your real capacity across the board, then build the mix. That’s where the wealth gets made.

Book a quick Wealth Planning Consultation and we’ll help you see where you stand, what’s possible, and how to make it happen.

• Stop feeling uncertain about your financial future
• You won’t need to make big sacrifices
• You won’t drown in paperwork or endless meetings

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About the Author: Ethan Stein is a financial planner with expertise in investment structuring, superannuation strategy, shares, property investment and other planning strategies. This article reflects general financial commentary only and does not constitute personal financial advice.

Financial Disclaimer: The information provided in this article is for general knowledge and informational purposes only and does not constitute financial advice. Individual circumstances vary significantly. It is essential to consult with a qualified and licensed financial planner before making investment decisions. Past performance of any asset class is not indicative of future results.