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. Even so, the drop in the annual concessional contributions cap for over-50s from $35,000 to $25,000 has dampened some of the enthusiasm for such a strategy.
Concessional contributions are 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 $250,000).
Note: Since 1 July 2017, a single annual concessional cap of $25,000 applies to all ages. For the 2016/2017 year, the annual limit for concessional contributions was $35,000 for anyone aged 50 (that is 49 years or over on 30 June 2016), and the concessional contributions cap was $30,000 for anyone under 50 years of age (that is 48 years or younger on 30 June 2016).
Important: An individual can only claim deductions for super contributions against assessable income, such as salary, investment income and capital gains (see SuperGuide article Tax-deductible super contributions: Claim no more than your income). 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 reducing CGT by making concessional contributions, including tax-deductible super contributions, see the following SuperGuide articles:
- Managing capital gains tax with super contributions
- Know your super limits: Reducing CGT via concessional contributions
- SMSFs: How do I calculate CGT on an asset sale?
- SMSFs: Selling a property asset and CGT
- Non-cash contributions, CGT and contributions caps
For more information about making super contributions, see the following Super Guides:
- Super concessional (before-tax) contributions: 2018/2019 survival guide
- Your 2018/2019 guide to non-concessional (after-tax) contributions
- Who can now make tax-deductible super contributions?
- Salary sacrifice and super: A guide for employees and employers
- Concessional contributions cap: A quick guide (10 Q&As)