Q: I am one of those people (and my wife) who made the decision years ago to invest in property rather than super. Now at 60, (wife 55) I am retired and live off my property investments. I have 14 tenants in 2 separate complexes and a separate house all in different locations. I would like to get rid of the properties at about age 65. Mainly because of the worry, and maintenance upkeep, and to give us more free time as I manage the properties. I have a SMSF with Australian blue-chip shares now worth $80,000. I don’t use managed funds or master trusts. If we sell, combined value about $4 million and capital gains tax (CGT) will eat into the sale value. Can we still contribute $150,000 each, per year to super and thus reduce our CGT liability.
Trish’s response: The $150,000 limit that you refer to in your question is the after-tax contribution limit, known as the non-concessional contributions cap. The $150,000 is still in place (for the 2013/2014 year), but you can’t offset any personal capital gains tax (CGT) liability by taking advantage of this cap. I explain the rules applicable to after-tax contributions in the article Your 2013/2014 guide to non-concessional (after-tax) contributions.
The concessional (before-tax) contributions cap is the relevant contributions cap when considering strategies to reduce a CGT liability or reducing any other personal tax liability, is. For anyone aged 60 or over, the concessional cap is $35,000 a year (for the 2013/2014 year) and $25,000 a year for anyone under the age of 60 (for the 2013/2014 year).
Note: From the 2014/2015 year, the concessional cap for individuals aged 50 years or over also increases to $35,000.
A registered tax agent, usually an accountant, can help you manage any tax bill from the sale of assets and superannuation may be just one of your tax strategy options.
Note: For the benefit of other readers, you must satisfy a work test if you’re planning to contribute on or after the age of 65. I explain the over-65 rules in the SuperGuide article For over-65s: Ten super tips for making super contributions