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 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 $180,000 each, per year to super and thus reduce our CGT liability.
Trish’s response: The $180,000 limit that you refer to in your question is the after-tax contribution limit, known as the non-concessional contributions cap. The $180,000 is still in place (for the 2015/2016 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 SuperGuide article Your 2015/2016 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. For anyone aged 50 or over (more specifically, for anyone aged 49 years or older on 30 June 2015), the concessional contributions cap is $35,000 (for the 2015/2016 year) and $30,000 a year for anyone under the age of 50 (more specifically, for anyone aged 48 years or younger on 30 June 2015).
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. For general information on the topic see SuperGuide articles Managing capital gains tax with super contributions and Capital gains: Reducing tax via super contributions.
Note 1: 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 tips when making super contributions
Note: 2: For information explaining how making super contributions can reduce capital gains tax, see SuperGuide articles Managing capital gains tax with super contributions and Capital gains: Reducing tax via super contributions.