CG Tax and allocated pension

[Fester]

I have been told that if a property is sold and the profit rolled into an allocated pension that capital gains tax is nil or reduced. Is this correct?

Regards, Fester

 

[Lplate]

Immediate Annuity and CGT

Bump..

I am wondering if what Fester asks is a viable proposition - ie, purchase immediate annuity to offset CGT from a sale.

I have heard that one can deduct a spouse contribution for super for the same effect (lower tax in a year) but not if say one is a federal public servant (something to do with their fund??

Is it the same as Steve Navra's approach of using some of the capital gain while still owning the property?

I have no idea, just looking for alternatives?

Lp

 

[Garry K]

I have been told that if a property is sold and the profit rolled into an allocated pension that capital gains tax is nil or reduced. Is this correct?

Regards, Fester

You might be thinking of the CGT concessions available to Small Business (assets < $5M) wherein the CGT can be reduced on sale of an Active Asset (used for the business).
Rather than pay any CGT, the business can elect to create an Eligible termination Payment (ETP like Superannuation) with the taxable gain and rollover that amount to a super fund ( and then eventually to an Allocated Pension). Maximum $500,000 per personi cumulative.

My understanding (not being an Accountant) is that IP's do not count as an Active Business asset. The ATO doesn't consider renting out an asset makes it an active asset in your usual course of business.

For example, if your business was a bakery, and owned the premises you operated from, that is an Active Asset. But, if the business also owned the shop next door, which it rented to a butcher, that is not an Active Asset.

Active Assets do not have to be property.

Above is a thumb nail sketch only.It is quite complex legislation and you need to carefully investigate it before proceeding.

GarryK

 

[Fester]

I thought the Government would encourage property investors into a rollover scheme if they sold. With all the talk about baby boomers and the increased demand for old age pensions in years to come, this would lessen the burden on Government coffers, being self funded. I personally would be more than happy to rollover my profit if I sold, and had no CGT , than spend it on a world trip!

 

[Garry K]

I thought the Government would encourage property investors into a rollover scheme if they sold. With all the talk about baby boomers and the increased demand for old age pensions in years to come, this would lessen the burden on Government coffers, being self funded. I personally would be more than happy to rollover my profit if I sold, and had no CGT , than spend it on a world trip!

Hi Fester

The idea has merit.

However, just by rolling it over doesn't necessarily stop you from withdrawing it and going on that trip, unless you haven't reached your "retirement" age and can't access your super yet. Perhaps it might get political support if there were some restrictions placed on accessing the CGT component, like it has to be paid via an annuity/ pension.

Many great ideas are forgotten first time around, and I like yours.

Why don't we start a lobby group to promote this concept?

How about a quick poll of forumites to see if it has support?

I'll have a go if you like.

GarryK