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 is the after-tax contribution limit, known as the non-concessional contributions cap, and applies for the 2016/2017 year (from 1 July 2017, the after-tax contributions cap drops to $100,000 a year). 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 2016/2017 year, for anyone aged 50 or over (more specifically, for anyone aged 49 years or older on 30 June 2016), the concessional contributions cap is $35,000, and $30,000 a year for anyone under the age of 50 (more specifically, for anyone aged 48 years or younger on 30 June 2016).
Note: From 1 July 2017, the annual concessional contributions cap drops to $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 (for 2016/2017 year).