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%. Capital losses in SMSFs in accumulation phase can only be used to offset capital gains and cannot be used to offset any other income.
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.
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.
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.
This means that the capital gains tax property six-year rule restarts each time you move back into the home. Provided that each interim period that you are away does not surpass the six years, then you can avoid paying the capital gains tax.
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.
Under current rules, the capital gains of super funds are taxed at 10 per cent when a long-term asset is sold, instead of a 15 per cent tax for other fund income. It equals a one-third discount for capital gains tax.
Selling an investment property when you retire can help you prepare better for retirement, as it can enable you to reduce the risk of your investment strategy, improve diversification, increase liquidity, reduce tax and simplify your overall financial situation.
To limit capital gains taxes, you can invest for the long-term, use tax-advantaged retirement accounts, and offset capital gains with capital losses.
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.
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%.
Super is a great way to save money for your retirement. It is generally taxed at a lower rate than your regular income. You typically pay 15% tax on your super contributions, and your withdrawals are tax-free if you're 60 or older.
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.
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.
Superannuation isn't considered an asset
However, despite writing a Will and distributing your assets as you see fit, your superannuation doesn't actually belong to you, so you can't include it in your Will. This is because your superannuation isn't considered as one of your assets and can't be included in your estate.
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.
The Principle Place of Residence Exemption
As a general rule, you can avoid capital gains tax when selling your investment property if that property is your primary place of residence (PPOR).
Generally, you can only claim one principal place of residence exemption anywhere in Australia at a time, although there are limited exceptions to this rule.
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.
An exception to this is the 6 month rule which states that where a taxpayer acquires a new dwelling that is to become their main residence, and the taxpayer still owns their existing main residence, both dwellings can be treated as the taxpayer's main residence for a period of up to 6 months.
Your main residence (your home) is exempt from CGT if you are an Australian resident and the dwelling: has been the home of you, your partner and other dependants for the whole period you have owned it.
Adding to super before tax
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%.
Exceeding your cap means that: the excess concessional contributions amount is included in your assessable income. this amount will be taxed at your marginal tax rate.