Q: If my self-managed super fund (SMSF) owns an investment property, and the SMSF later sells the property, what is the amount of capital gain tax payable by the SMSF?
A: Before we respond, please note that anyone considering the tax implications of a super strategy or investment decision should speak to a registered tax agent, typically an accountant.
In relation to superannuation and capital gains tax (CGT), the tax payable depends on whether the super account is in retirement phase (previously known as pension phase), or in accumulation phase. Another way of describing ‘accumulation phase’ is simply to say when a super account is not in retirement phase (that is, not paying an income stream/pension).
The table below summarises the tax treatment of capital gains, and the text following the table explains the tax treatment in more detail.
|Accumulation phase||Retirement phase|
|Tax on capital gains (part of earnings)||Asset held less than 12 months before sale||15%||0%|
|Asset held 12 months or more before sale (33% discount)||10%||0%|
While a super account is in accumulation phase, any earnings on the assets representing that super account are subject to 15% earnings tax, although capital gains may be taxed at a discounted rate.
While a super account is in accumulation phase, any capital gains that your superannuation fund makes from the sale of fund assets are subject to earnings tax. The tax implications when selling a SMSF asset, such as a property investment, will depend on the length of time an SMSF owns the asset before sale.
During accumulation phase, if an asset is sold within 12 months of purchase, then any capital gains is subject to 15% earnings tax.
Important: During accumulation phase, if the SMSF asset sold has been held for more than 12 months by the fund, then the fund can take advantage of the CGT discount. The CGT discount is 33%, which means the SMSF only pays 15% earnings tax on two-thirds of the capital gain. In effect, a capital gains tax rate of 10%.
Retirement phase (formerly known as pension phase)
If an individual is drawing a pension in retirement phase from an SMSF account, then no tax is payable on any earnings from assets financing the superannuation pension. A pension is also known as an income stream. In short, your super fund does not pay tax on investment income, including capital gains, from assets that finance a complying super pension in retirement phase.
For more information…
The following SuperGuide articles also explain how the tax rules apply to earnings on superannuation assets:
- Super for beginners, part 17: Four must-knows about super’s tax rules
- Super for beginners, part 15: Super tax – as easy as 1-2-3
- SMSFs: How do I calculate CGT on an asset sale?
For more information on property and super, see the following SuperGuide articles: