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 57) 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 will eat into the sale value. Can we still contribute $180,000 each, per year to super and thus reduce our CGT liability?
A: The $180,000 limit that you refer to in your question was the after-tax contribution limit that was applicable until 30 June 2017. After-tax contributions are known as non-concessional contributions, and the annual limit is known as the non-concessional contributions cap.
The NCC cap that applies for the 2017/2018 year is now $100,000, although individuals under the age of 65 can bring forward 2 years’ worth of NCC limits, and make up to $300,000 in NCC in one year.
Note: You can’t offset any personal capital gains tax (CGT) liability by taking advantage of this non-concessional cap, rather you can only use the concessional cap (see next paragraph).
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 the 2017/2018 year, the concessional contributions cap is $25,000, and this cap applies to all ages.
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: 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.