Q: I have a self-managed super fund (SMSF) and I also have two investment properties in my personal name. When I sell the properties, I will be required to pay capital gains tax. Can this capital gains tax be offset by a contribution to the SMSF which would be tax-deductible? Would there be a 15% contributions tax? I am 60 years of age, but not retired.
Reducing the amount of income tax payable, including income tax payable on net capital gains, by making concessional (tax-deductible or salary sacrificed) super contributions remains a popular strategy.
Note that concessional contributions will be subject to 15 per cent tax when entering the fund (and 30% contributions tax if the individual has an adjusted taxable income of more than $300,000, and from 1 July 2017, if adjusted taxable income is more than $250,000).
For the 2016/2017 year, the annual limit for concessional contributions is $35,000 for anyone aged 50 (that is 49 years or over on 30 June 2016). The concessional contributions cap is $30,000 (for the 2016/2017 year) for anyone under 50 years of age (that is 48 years or younger on 30 June 2016).
Note: From 1 July 2017, a single annual concessional cap of $25,000 applies to all ages.
Important: A self-employed or non-employed individual can only claim deductions for super contributions against assessable income, such as salary, investment income and capital gains. For employees, entering a salary sacrifice arrangement (making before-tax contributions to a super fund pursuant to an arrangement with an employer) is another popular strategy used to reduce an individual’s taxable income. Superannuation Guarantee contributions are treated as concessional contributions, and count towards the annual concessional contributions cap.
For more information on making concessional contributions, including tax-deductible super contributions, see the following SuperGuide articles:
- Managing capital gains tax with super contributions
- Who can make tax-deductible super contributions?
- Super concessional (before-tax) contributions: 2017/2018 survival guide
- Salary sacrificing and super: 10 facts you should know
- Concessional contributions caps: 10 facts you should know
- Employees can make tax-deductible super contributions from July 2017