The Key to Achieving Financial Independence and Early Retirement (FIRE) in Australia

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Are you tired of reading about early retirement strategies that are all focused on the US market? Do you want a retirement plan that takes into account Australia’s unique tax system and laws? Look no further – this article will provide you with a step-by-step guide on achieving Financial Independence Retire Early (FIRE) in Australia. We’ll explore the key points and strategies that will help you retire early and live the life you desire.

What is FIRE?

FIRE stands for Financial Independence Retire Early and is an investing and lifestyle movement that has gained popularity in recent years. It involves extreme savings and investments with the goal of accumulating 25 to 30 times your annual living expenses. By following the 4 percent rule, this accumulation will allow you to retire early and live off your investments.

The Unique Aspects of Australia’s Laws

While there are countless resources and strategies available online for achieving FIRE, most of them do not take into account the unique aspects of Australian laws. One of the secrets to achieving FIRE in Australia is to utilize salary sacrifice into your superannuation.

The Power of Superannuation

Many individuals believe that superannuation is useless for achieving FIRE because the money cannot be accessed until the age of 60. However, this belief is flawed. If you plan on living beyond the age of 60, superannuation should be a core aspect of your FIRE investments.

By contributing a portion of your wages to your superannuation fund through salary sacrifice, you can avoid paying income tax on that money. Additionally, all earnings within your super fund are taxed at a maximum rate of 15 percent, which is significantly lower than the taxes on investments outside of super. This means that the after-tax returns of your super investments are better than equivalent returns from other investments, such as ETFs.

The Power of Salary Sacrifice

To illustrate the difference between investing in super and ETFs, let’s compare how long it would take to accumulate $750,000 in each. If you invest the maximum annual salary sacrifice amount of $27,500 (before tax) into your super, with a conservative 8 percent return, it would take you 17 years to reach your retirement target. On the other hand, if you invest the same amount in ETFs after paying income tax, it would take you 24 years to achieve the same result. By using salary sacrifice into super, you can potentially retire seven years earlier.

The Advantage of Superannuation after 60

When you retire at a younger age and rely on your ETF investments for living expenses, those investments will steadily decrease over time. However, your superannuation will continue to compound. By the time you reach 60, your portfolio will be primarily or entirely comprised of superannuation.

This is advantageous because once you turn 60, you can commence an allocated pension with your super, and all investment earnings become completely tax-free. This can significantly boost your passive income during retirement. For example, with $1.5 million in superannuation, you could potentially receive $120,000 per year in passive income, compared to $88,000 if the same amount were invested in ETFs (taking into account income tax on earnings).

Homeownership and FIRE

While many FIRE followers focus solely on investments, homeownership can provide significant financial advantages in Australia. Rent money is essentially dead money, while homeowners have the advantage of both living in and benefiting from an appreciating asset. Additionally, selling your home in Australia does not include any capital gains tax on your profits, unlike in the US.

Furthermore, owning a home can have an impact on your eligibility for the age pension. If you own a home, it is exempt from the asset test, potentially reducing the amount of money you need to save up in your pre-retirement years. Accessing the age pension after turning 67 can significantly change your retirement calculations and provide additional financial support.

The First Home Super Saver Scheme

Salary sacrificing into superannuation can also help you save for your first home. The First Home Super Saver Scheme allows you to withdraw the money you previously salary sacrificed into super to purchase your first home. This effectively allows you to use your before-tax dollars to fund part of your home purchase.

By contributing the maximum amount of $50,000 to the scheme, you can save up to $10,000 in after-tax savings compared to using a regular term deposit. This is the amount of tax you save by utilizing the scheme. Additionally, the First Home Super Saver Scheme can be combined with other initiatives, such as the First Home Guarantee and stamp duty exemptions, to further benefit first-time buyers.

Allocating Income for FIRE and Mortgage Repayments

Once you have a home and are still working towards FIRE, it’s crucial to properly allocate your income. Superannuation should be prioritized due to its higher returns after taxes. Start by determining the amount you need to hit your early retirement target and work backwards to calculate the required salary sacrifice amount.

After maximizing your super contributions, you can then invest in ETFs. However, instead of investing a fixed amount every fortnight, consider utilizing debt recycling. This strategy involves allocating all of your income to repaying your mortgage and then redrawing the excess repayments to invest in ETFs. This gradually turns your mortgage from non-deductible bad debt to deductible good debt.


Achieving financial independence and retiring early (FIRE) in Australia requires a unique approach that takes into account the country’s tax laws and superannuation system. Utilizing salary sacrifice into super, prioritizing homeownership, and properly allocating income can significantly improve your financial situation and help you retire early.

Remember, always seek professional advice to tailor your retirement plan to your specific circumstances. By following the strategies outlined in this article, you can take meaningful steps towards achieving FIRE and enjoying the lifestyle you desire.

So what are you waiting for? Start taking control of your financial future today and embark on the path towards achieving FIRE in Australia.