Making personal concessional (deductible) contributions to superannuation can effectively reduce capital gains tax within your individual name, because you receive a personal tax deduction for making personal concessional contributions to super, which reduces your assessable income and can also reduce your marginal tax ...
superannuation funds are also required to pay the tax on profits made through the sale of their assets. If you have your superannuation with a standard retail or industry fund, it's unlikely that you will actually see the payment of CGT as a transaction within your account.
Need to know: The super CGT cap
This includes the small business retirement exemption and the 15-year CGT exemption. This cap is indexed annually and is $1,650,000 for 2022–23. This is the maximum amount of CGT-related super contributions you can exclude from your non-concessional contribution limits.
You can place more of the proceeds of the sale into super by making non-concessional (after tax) contributions. Although this won't immediately reduce your tax, it will place the funds in a very tax-friendly environment and help to build funds for retirement.
However, if you meet certain conditions, you may want to claim a portion of your super contribution as a tax deduction. By doing this, you could use the tax deduction to offset some (or all) of your taxable capital gain and reduce (or eliminate) your CGT liability.
Putting extra into super or investing in an investment property both have advantages, and both have tax concessions applied to them. With super, salary sacrifice will save you income tax, then the money will be invested in a low-tax environment.
If you own separate interests in the same CGT asset and sell those interests together, the 15-year exemption applies only to interests in the asset that you have owned continuously for at least 15 years. The exemption does not apply to any interest you have owned for less than 15 years.
Adding to your super with before-tax contributions can help to reduce the tax you pay. You can contribute up to $27,500 each year. These are contributions you have not paid any personal income tax on. They are called 'concessional contributions' because the concessional rate of tax paid on super is 15%.
How Much Can I Put into Super in a Lump Sum 2023? You can put a lump sum of at least $110,000 into superannuation, which is the general non-concessional contribution cap. However, you can often put in much more using the concessional contribution cap, bring-forward rule and carry-forward rule.
The capital gains tax property six-year rule allows you to use your property investment, as if it was your principal place of residence, for a period of up to six years, whilst you rent it out.
In Australia, retirees do pay capital gains tax when selling an investment property. However, retirees are likely to pay less in capital gains tax than pre-retirees, due to assessable capital gains being added together with all other forms of taxable income before tax is calculated at marginal rates.
What's the tax concession? Your salary is sacrificed straight into your super, so it's taken from your gross (before-tax) pay. This means it'll be taxed at 15%, unless you've exceeded the concessional contributions cap. Employer super guarantee contributions are also taxed at 15%.
Despite what many people (and under-educated advisers) think, superannuation investment earnings are not received tax-free just because you have reached age 60. In fact, your age has absolutely no bearing on the taxation of your super earnings.
You must include the taxable component of your super payment as assessable income on your tax return.
If you can afford it, making extra contributions is a great way to boost your retirement savings. And it can reduce your tax. If you're on a low income, you may be eligible for extra contributions from the government.
Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.
Understand how much you can contribute
There are limits on how much you can pay into your super fund each financial year without having to pay extra tax. These limits are called 'contribution caps'. You can contribute up to $110,000 each year in non-concessional contributions.
Australia's six year absence rule allows you to turn your primary place of residence (PPOR) into an investment property and collect rent and claim depreciation for up to six years provided you've stopped living there. When it comes time to sell you won't be liable for capital gains tax or CGT for those six years.
CGT Retirement Exemption Over 55
If you are aged 55 or over when you make the choice to apply the CGT Retirement Exemption, you are not required to contribute the exempt amount to a superannuation fund, even if you were under age 55 when you received the sale proceeds.
If you sell a business asset, capital gain from the sale is exempt up to a lifetime limit of $500,000. If you're under the age of 55, you must pay the exempt amount into either a: complying superannuation fund. retirement savings account.
Withdrawing some of your super early is a big financial decision that you shouldn't make lightly. It could leave you with less money for your retirement and impact your insurance within super. So before applying, stop and think about the potential consequences of accessing your superannuation early.
Balanced. Investment mix: around 70% in shares or property, and 30% in fixed interest and cash. Or 'moderate' option with 50% in shares and property.