How can I reduce CGT by paying into Superannuation

Hi All
I am selling two IPs one this financial year and the 2nd one early next financial year.
With the sale of the IP this financial year, some capital losses and by using up any available unused "catch up" concessional cap from the previous 5yrs I am expecting to pay little or no Income Tax.
I intend to use the leftover cash to pay $110k as a non-concessional contribution before June 30th.
Onto the 2nd IP, I expect this to give me a Total Capital Gain of 500K and therefore a taxable component of 250K.
I intend to pay 3 x 110K "Bring Forward" non-concessional contributions.
So as I understand the situation, I will still have $250K subject to personal Income tax rates.
There will be approx $135k subject to tax rates of 37% and 45%.
Could I pay further contributions to my Super and have those taxed at 30% and therefore make a saving.
I assume any advice given is in general terms only and that I will do my own due diligence.

 

No, only concessional contributions within the caps, including carry forward will provide a tax deduction.

Note, the caps are almost certain to rise to 30k/120k for FY 2024/24 so consider holding off with triggering the bring forward as it will rise to $360k

 

What you are proposing won't decr ease your taxable income because the super contributionswon’t be a deductible

 

When do you think we will know when or if the caps will increase. Is this the federal budget in May?

Thanks, Hockey Monkey

 

Get professional advice Roger
You are selling in two separate tax years which is good, but from the brief info provided it may be beneficial to hold back on using all the catch-up concessionals in the first year. By holding back and using most or all in the second year you can probably achieve a better 'smoothing' of overall tax. (This assumed your super remains less than 500k in early part of year 2 which is a prerequisite for that rule - note your $110k ncc in yr 1 idea may even disrupt that threshold so be careful). So many working parts.
Spend an hour with your accountant and workshop some scenarios.

Oh and too bad Albo is screwing you over on the marginal tax now unfortunately. The low achievers of Australia thank you for your additional subsidy.

 

Hi all again
Just a supplementary question,
Is there a limit in %terms of someone's salary that can be salary sacrificed?
Or assuming my salary was $27500 could all of this salary be sacrificed?
Cheers

 

Thanks
My super balance will be less than 500K.
On the catch-up concessional I guess you are thinking maybe I do 4 years' worth which might mean I pay some tax this financial year but under 30% and next FY use the 5th year's worth to reduce the amount of 45% and or 37% tax rates?

 

Thanks, Wylie

My issue is that the CGT event is likely to be quite close to the end of this financial year which will leave my accountant precious little time to assess my actual tax obligations as I have several other IPs and a small business. I'm gonna have to take a bit of a punt on the likely $$ outcomes.

 

We should find out in February once the ABS release AWTOE numbers.

 

have you signed the contract? It’s generally based on contract date

 

Hi Roger. Not quite. It will just depend how the numbers stack up for your circumstances. This is an avenue that is available to you but not compulsory of course - so it's just up to you to figure out how to use it to best advantage. The only thing I can say is that its a five year rolling thing. ie It MAY well suit you just to do the catch-up from 2018/19 in the 2023/24 year as its going to be lost after that. Then it MAY suit you to do the catchups for the ensuing 5 years for the year that you sell the 2nd property in 2024/25 as that's the one that seems to be giving the bigger tax headache. But you have to play around with the figures and do whatever combo gets you the lesser tax payable over the two years is how I would be thinking. Savvy?
With the capital losses carried forward part you have no flexibility but with this part you do.

 

This is something you really don’t want to get wrong so I’d just go straight to an accountant to give proper advice. A small price to pay to ensure you’re getting all you can.

 

Ask your accountant about contribution reserving strategies in SMSF's. They may not be able to advise on this but might be able to point to who can. Obviously lots of considerations with having a SMSF but if you already have one it could be of benefit.

 

1. How old are you ? Personal deductible contributions can be denied to some based on age
2. Div 293 ?
3. $500K balance rule
4. Downsizer eleigible ?
5. Spouse benefits etc
Every $1 of contribution and the CGT amounts can push you over the Div 293 limit and leave limited benefits

Tax advice to CHECK available caps is important as if you fully use the NCC 3 year rule it may leave you exposed to BOTH concessional and NCC excess contributions if its out by any minor amount