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

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  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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