Implications of putting cash from sale of IP into Super rather than a bank account

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Angel, 12th Jan, 2022.

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  1. Angel

    Angel Well-Known Member

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    Our final IP will settle next week with excess capital after accounting for all the mortgages. Can I get an idea of the pros and cons of putting most of the excess into my/our Super (accumulation) rather than sitting in a bank account or offset against the PPOR. I am 61 and Hubby is 65 and so far we have no need to start drawing on hubby's super. He is retired from his main job and doing some casual work and I work permanent part-time.

    I know to ask our accountant and our financial planner but I would appreciate your thoughts now while waiting for appointments with the Pros. I just realised we need to know this now before settlement in case the deposit needs to go directly from the settlement, and my brain was previously going to deal with it later, after settlement.

    Thanks
     
  2. willair

    willair Well-Known Member Premium Member

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    I was reading a while back that IF you were to transfer everything into your super you pay no Tax after the sale of a investment..
    From memory I think it may have been geoffw but I could be wrong.
    BTW, well done to yourself and your husband as now your life starts.
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Wrong. When you sell an investment that produces profit then CGT is inevitable. But it may also be possible to increase contributions to super and get a deduction that reduces the CGT impact. However over the long run where you PUT the cash after the sale is all settled can make a world of difference especially higher income earners on top marginal rates who will take a hiding on tax that produces a compound growth NEGATIVE effect to limit future wealth. That said, a person aged 35 wouldnt usually throw it all into super unless already financially secure. Super is preserved and cant come back out.

    The OP is aged 60+ and this is very different for them. There may even be potential for the spouse aged 65 to use the downsizer rules to add MORE to super that isnt taxed when it goes it and when he draws a pension is means the investment income is tax free..And iof downsizer doesnt work there are more than one way to push money to super and there may even be a tax benefit in doing it !! ..Reasons why seeking tax AND financial advice as early as possible is important. At age 65 it can be tiny rules around dates and time limits etc that make a world of difference. Dont wait for settlement.
     
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  4. willair

    willair Well-Known Member Premium Member

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    Paul,I apologise for that post as I must have read as normal the post the wrong way..
    The only simple way I know is IF you never sell then it all just keeps compounding away..
     
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  5. Angel

    Angel Well-Known Member

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    Thank's guys. We cant use downsizer rule apparently. On ATO site it states from sale of main residence. We meet all the other requirements.
     
  6. Propin

    Propin Well-Known Member

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    Was it ever your main residence?
     
  7. jaydee

    jaydee Well-Known Member

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    Perhaps use the bring forward rule.
    That is, each of you make a non-concessional payment of $330k into your respective super accounts.
     
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    A person aged 65 may find that difficult
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The rule is not as strict as many think. It only had to be your home at SOME POINT in its history NOT your home at the time of sale !!. I have encountered two now who told me they cant use it who found they could. Common mistakes:
    1. It IS your home at the time of sale. Wrong.
    2. It is being sold to downsize implying reinvesting into a new home. Despite that name its incorrect. You dont have to downscale, buy or anything complex
    3. One and not both partners owns it. BOTH can be eligible to contribute if one sells. And even if they were not married 10 years !!
    4. That the source of the contribution is from the sale. Doesnt need to be.
    5. Fail the 10 year rule. However their divorced partner owned the property and they received it in marital settlement. They are considered to have been the owner since acquired.

    One had literally days to fail the contribution timing requirements when they learned they were eligible. She lived in it for three months when it was originally acquired before she met present partner. It was rented after that.
     
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  10. Angel

    Angel Well-Known Member

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    Never lived in it.

    The funds will be subject to CGT, so any deposit into Super would be Non-concessional, is that correct?
     
  11. Angel

    Angel Well-Known Member

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    FYI
    My accountant said we do not have to transfer proceeds of sale directly at settlement, so we will have a proper consultation once all the settlement invoices are finalised and statements come through.

    signed Happy girl:
    We both received negative covid results this morning too so back into the real world
     
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  12. geoffw

    geoffw Moderator Staff Member

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    It probably was me - but referring to sale of PPOR - or, downsizer contribution as already mentioned.

    We're in the process of moving out of our old place into a rental (for a year or so while.we build) - settlement and downsizer contribution takes place next week.
     
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  13. willair

    willair Well-Known Member Premium Member

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    geoffw,sorry about that ..Just mixed it up between the ''ppor'' and the investment part..
     
  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Two key conditions that are most most common concern
    • you have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
    • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
    Normally at same time they should check and advise on concessional contributions to reduce CGT at same time and even non-concessional cap if you really want to put a lot into super.
     
  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes. If your age and caps permit. You can also make a concessional element that will offset the CGT. Subject to cap and also the carry forward unused cap rule
     
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  16. samiam

    samiam Well-Known Member

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    This is very informative. Thank you. We will come and see you when we hit 55 :)
     
  17. RENI99

    RENI99 Well-Known Member

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    Maybe when you are 50 if the change proposed in the budget to age 60 comes in. That was suppose to be effective come 1st July 2022. Not sure where the legislation is at though.
    It seems quite generous and could be worth some people moving into their investment property for a period of time (seems like there is no requirement on minimum time??) and making it their PPOR so that they qualify - e.g a few months before selling and could use this time to improve it. For those that want to build up their super balance - sounds like good pre or post retirement gig when hitting 60 or perhaps are not able to use the non concessional limits (or use both).
    We have a property - was our PPOR now rented and taking advantage of the 6 year CGT rule. We had planned to sell it in 2-3 years but would consider holding on for 5 years if we could qualify for the downsizing contribution. I will be 60 by then partner would have to wait until 2028. So we are considering offloading other assets that would incur CGT rather than selling the PPOR within the 6 year limit - we retired 4 years ago. We will modelling various scenarios and utilising financial adviser and accountant as part of this decision making.
     
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  18. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Shame @Angel sold now....The downsizer super option AFTER 1 July 2022 would have become available. It became law late last week as @REN199 has indicated. However the other concessional and non-concessional caps and bring forward rule may still be very attractive.
     
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  19. JPHustle

    JPHustle Well-Known Member

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    We sold an IP last year, I put enough funds into my super to pretty much have no CGT
     
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  20. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    But the super will be taxed at 15%...generally such arrangements save tax but dont eliminate tax