Simply put, yes, retirees pay capital gains tax in Australia. However, being a retiree does make one eligible for certain exemptions and concessions, particularly in regards to the sale of property or a business.
It's a common myth that retirees, pensioners or over 65s don't have to pay CGT, but unfortunately, there is no age limit to CGT in Australia. However, assets purchased before 20 September 1985 are exempt, and exemptions apply for certain SMSF asset sales.
You won't have an assessable capital gain when you sell a business asset if: your business has owned the asset for at least 15 continuous years. you're aged 55 years or over. you're retiring or permanently incapacitated.
15-Year Retirement Exemption: If you sell a business asset that has been owned for at least 15 years, the entire sum of CGT may be exempt. In this case, all proceeds can be contributed into your superannuation, up to the lifetime limit of $500,000.
Usually, a property stops being your main residence when you stop living in it. However, for CGT purposes you can continue treating a property as your main residence: for up to 6 years if you used it to produce income, such as rent (sometimes called the '6-year rule')
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.
CGT does not apply to depreciating assets used solely for taxable purposes. This includes: business equipment. items in a rental property.
The net gain is treated as income for tax purposes, so it will be taxed at the same rate (15%) as other income in the fund. If an asset is held for more than 12 months, any capital gain is eligible for a discount of one-third, resulting in an effective tax rate of 10%.
If you acquire a new home before you dispose of your old one, you can treat both as your main residence for up to 6 months. You can do this if all of the following are true: you lived in your old home as your main residence for a continuous period of at least 3 months in the 12 months before you disposed of it.
Capital gains are taxed at the same rate as taxable income — i.e. if you earn $40,000 (32.5% tax bracket) per year and make a capital gain of $60,000, you will pay income tax for $100,000 (37% income tax) and your capital gains will be taxed at 37%.
Companies and individuals pay different rates of capital gains tax. If you're a company, you're not entitled to any capital gains tax discount and you'll pay 30% tax on any net capital gains. If you're an individual, the rate paid is the same as your income tax rate for that year.
Generally, all withdrawals over age 60 from superannuation are received completely tax free. The only exception is if your balance includes a taxable (untaxed) element. You can contact your superannuation provider to see if your balance includes a taxable (untaxed) component.
12-month ownership requirement
The CGT event is the point at which you make a capital gain or loss. You exclude the day of acquisition and the day of the CGT event when working out if you owned the CGT asset for at least 12 months before the 'CGT event' happens.
The property you inherit is a capital asset you acquire on the day a person dies. Generally, capital gains tax (CGT) doesn't apply at the time you inherit the dwelling. However, CGT will apply when you later sell or dispose of the dwelling, unless an exemption applies.
Non-capital assets are equipment or other physical assets with an acquisition cost of $1,000 or more but less than $5,000 per unit and with a useful life greater than one year.
A pensioner can earn up to $33,000 before paying tax in Australia, if single, or $30,500 if a member of a couple. This is calculated using the tax-free threshold of $18,200, plus being eligible for the Low Income Tax Offset and the Seniors and Pensioners Tax Offset (SAPTO).
Instead of going forward with its proposed $500,000 lifetime cap on after-tax contributions, (with a retrospective counting of the last ten years) the Government has decided to go back to the current rules for after-tax contributions but with a lower annual limit of $100,000.
The current transfer balance cap is $1.9 million
It includes the total amount you transfer from your super to any of your retirement phase pension accounts. It also includes any death benefits you take as a pension. The cap doesn't include transition to retirement accounts.
The major draw is what experts have labelled the “six-year rule”, which means if someone buys a property, lives in it for six to 12 months, and then rents it out, they don't pay any capital gains tax on the growth in its value for six years.
A person can only have one principal place of residence. If you own multiple properties and live in more than one of them, you are generally only eligible for one exemption on the property deemed to be your principal place of residence.
You pay tax on either all your profit, or half (50%) your profit, depending on how long you held the shares. Less than 12 months and you pay tax on the entire profit. More than 12 months and you pay tax on 50% of the profit only.