Selling an IP and making contributions to super

The issue of ever reducing caps in super can pose a concern to some people aged in 60s etc. Especially property investors who may seek to sell assets at retirement but face the problem that the proceeds stay outside super and are then subject to ordinary income tax v's retirees with large super balances who pay no tax.

The new "downsizer" contribution of $300,000 per person for those aged 65+ after July 2018 allows UP TO $600K for a couple to be made to super over and above other caps.

The catch is as follows:
- Must have sold a former home
- Must have owned it for at least 10 years
- Its a single use - Cant be done twice or in respect of two properties in same year
There are no checks, tests or requirements about buying another home.

Now we all think of a home as the one we live in right ?? Not according to this new law.
1. You dont have to actually downsize. You just have to have sold a former home that is eligible. In
theory you can upsize and still contribute if you have the wealth. and here is the best part...

2. The property can even be an investment property provided at some time in that ownership period you lived there and its was your main residence at that time

Example Fred and Mary bought a property that was their home in 1984 and they lived there two years. The later rented it out and it has been a IP since. They sell it in August 2018 for $1m. After CGT of $0 lets assume they have $1m surplus cash. They could consider contributions to super of at least $325K each

So the message here is for anyone aged 65+ who seeks to sell ANY property they once lived in should consider financial / tax advice to see if they can benefit from proceeds in super...Remembering super earnings can be tax free for persons who are 65+

 

This could be combined with the strategy of selling the main residence CGT free and moving into an investment property that you have owned for a number of years - and later passing this on tax free to your heirs.

 

Correct. But could also be combined in super....

If sell the main residence CGT free while aged under 65 further concessional and non-concessional contributions of up to $650K per couple could also be combined with the downsizer issue after age 65 assisting a further $600K. Downsizer and non-concessional contribs should be tax free to child beneficiaries on death.

Tax savings alone on this in super (at 3% earnings) could pay for an annual cruise holiday. And at present get refundable franking credits that enhance yield.

 

Am I right in thinking that you can bring forward 3 years of non-consessional contributions of a max of 300K per person?

So if you were to downsize before the age of 65 you could make a 600K per couple contributions into your Super accounts?

 

We also have the rolling forward unused concessional contributions for up to five years starting this year which may help reduce future CGT bills.

 

You mean you can make up for years that you did not contribute up to the max limit for non-concessional contributions? Can you give me a concrete scenario for this?

 

Probably not but maybe. There is an age test to the bring fwd rule which contradicts the downsizer rules. But a longer term strategy maybe.

For a couple the combined amounts could be higher than $1.25m if planned properly.

 

Thats not the gem it sounded in Parliament. Shorten wants to end it and IF it is used in 6 years time you must have a balance under $500K and then be allowed to catch up the past 5 years of up to $125K...Maybe.

So to make a $50k concessional in the 2020 year you would have to have had $0 concessional in BOTH 2019 and 2020. And be eligible in each year to contribute and have sources of income that allows it to be funded AND have taxable income that fits the strategy. Contributions cant create a tax loss and ideally only suits someone with assessable income of say $85K in 2020 but who has no employer. This seems to me to fit a CGT profit and not much more. Lots of maybes.

 

NO. Downsized contributions require age 65 or +. Based on owners age at time they sell.

 

https://www.ato.gov.au/Individuals/Super/Super-changes/Change-to-concessional-contributions-cap/

 

This is an issue requiring licensed financial advice. Its highly complex