Know your super limits: Reducing CGT via concessional contributions

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

© Copyright Trish Power 2009-2014

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IMPORTANT: SuperGuide does not provide financial advice. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. Over the past 12 years my BT Future Goals & BT Multi-Manager Growth super fund has averaged a return of 3.22%. This return is barely greater than CPI. Can you please offer some advice as to what I need to consider when moving my investment to another fund.

  2. My husband and i are Both 67. He is retired and I will be at the end of this year. We both have a fist state super account and I also have a SASS (State Authority Super Scheme) with a total of approx $770,000. A large proportion is super contributed before tax. I have heard that there are tax benefits to redistribute the super into a pension account. I don’t understand the reason for or implications. Can you explain?

    Many thanks

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