Govt sets $100,000 a year super threshold

[alexlee]

I have read the whole thread looking for an answer to this question (it was asked but no reply)
If myself and partner start a SMSF today (both 46)
use our $200,000 of current super as a deposit on an invest property for the fund, house valued at $600,000.
Over the next 15 years we pay the max amount of voluntary contributions plus the rental income clears the loan amount.
We both retire, the fund sells the house now valued at $1.5M do we pay 15% CGT on that?

thanks in advance.

Based on the rules, it would seem (simplistically) that you'll have to pay 15% on the capital gains. Now, assuming sell price of 1.5m and cost of 600k, that's 900k. Discount by 50%, so gain of 450k. If it's distributed to two people and the first 100k is tax free for each person, you pay 15% on 250k.

Capital gains is based on selling price less cost. The loan balance is irrelevant.

 

[HiEquity]

Now that is a bunch of rubbish.
People get paid what is written on the wage scale, not what an employer wants to pay them.
If that statement was actually true, supply and demand would be all that is required...and no government intervention.

Sorry kathryn but that statement doesn't withstand any scrutiny. If it wasn't worth paying someone a minimum wage they wouldn't get a job. No-one is forcing an employer to hire them. The fact that employers hire people on minimum and award wages shows only one thing - that the employer is happy to pay that amount - otherwise they wouldn't.

In the absence of significant unemployment (such as we enjoy in Australia now), it's impossible to argue minimum and award wage levels are too high.

 

[dan c]

Based on the rules, it would seem (simplistically) that you'll have to pay 15% on the capital gains. Now, assuming sell price of 1.5m and cost of 600k, that's 900k. Discount by 50%, so gain of 450k. If it's distributed to two people and the first 100k is tax free for each person, you pay 15% on 250k.

Capital gains is based on selling price less cost. The loan balance is irrelevant.

One correction, super funds only receive 1/3 discount, not 1/2. So the taxable gain would 2/3 of $900k, or 600k, using Alex's figures.

 

[alexlee]

One correction, super funds only receive 1/3 discount, not 1/2. So the taxable gain would 2/3 of $900k, or 600k, using Alex's figures.

I stand corrected. I didn't know that super funds only receive 1/3 discount.

So on gains of 600k, 200k of which is tax free, you'll have to pay 15% on 400k.

 

[Terry_w]

I stand corrected. I didn't know that super funds only receive 1/3 discount.

So on gains of 600k, 200k of which is tax free, you'll have to pay 15% on 400k.

So CGT works out to be max 10%. Pretty good rate considering outside super it would be more like 24%

 

[kurnol]

Based on the rules, it would seem (simplistically) that you'll have to pay 15% on the capital gains. Now, assuming sell price of 1.5m and cost of 600k, that's 900k. Discount by 50%, so gain of 450k. If it's distributed to two people and the first 100k is tax free for each person, you pay 15% on 250k.

Capital gains is based on selling price less cost. The loan balance is irrelevant.

So this new law is meant to hit the wealthy? I'm definitely not in the top bracket of income earners but could achieve the above example.

 

[kurnol]

So CGT works out to be max 10%. Pretty good rate considering outside super it would be more like 24%

It is a good rate, but not as good as the current pension phase rate which is zero.

 

[Mr. Fabulous]

Based on the rules, it would seem (simplistically) that you'll have to pay 15% on the capital gains. Now, assuming sell price of 1.5m and cost of 600k, that's 900k. Discount by 50%, so gain of 450k. If it's distributed to two people and the first 100k is tax free for each person, you pay 15% on 250k.

CGT on assets held in super is 15% if the asset is held less than 12 months. If it is held longer than 12 months, the asset is eligible for the discount rate of 10%.

From here: SMSF selling a property asset

"During accumulation phase, if an asset is sold within 12 months of purchase, then any capital gains is subject to 15% earnings tax. If the asset sold has been held for more than 12 months by the fund, then the fund can take advantage of the CGT discount. The CGT discount means the SMSF only pays 15% earnings tax on two-thirds of the capital gain. In effect, a tax rate of 10%."

 

[Mr. Fabulous]

It is a good rate, but not as good as the current pension phase rate which is zero.

The pension is income, not CG! If you sell an investment asset, do you think you shouldn't have to pay tax on the gain? As I have stated earlier in this thread, the tax free pension, introduced as a cheap vote grab by the Liberals, should be abolished immediately. It is unsustainable and irresponsible on a par with Labor's crappy handling of money.

It is inevitable that it will be repealed. Just a matter of which side of the Laberals will end up mopping up the mess.

 

[greedy2000]

The pension is income, not CG! If you sell an investment asset, do you think you shouldn't have to pay tax on the gain? As I have stated earlier in this thread, the tax free pension, introduced as a cheap vote grab by the Liberals, should be abolished immediately. It is unsustainable and irresponsible on a par with Labor's crappy handling of money.

It is inevitable that it will be repealed. Just a matter of which side of the Laberals will end up mopping up the mess.

The pension is actually an asset base from which you draw a retirement income from. That income is a mixture of investment earnings(dividends, rent, interest, CG's etc) and a return of capital.

The problem I have is that the money in your super/pension has got there as after tax contributions, whether that be at the 15% contribution rate or after your MTR.

You have already paid tax on those assets, the government is double dipping. Investment earnings outside of super should be tax free as well but we don't live in a perfect world.

The government still gets to tax you on your super assets... dont forget as soon as you spend it you pay 10% GST...

I really don't hope that you would seek an end to a tax free environment on your retirement assets.

so in your opinion you be happy that the government stopped negative gearing, as well as taxing the earnings on your super at your MTR? perhaps we should all earn exactly the same, buy the same brown track suit and work for our glorious labour party?

 

[Mr. Fabulous]

Investment earnings outside of super should be tax free as well but we don't live in a perfect world.

If you don't wanna pay tax, fine, then don't use:

- footpaths
- roads
- public hospitals
- any other infrastructure that is provided for with taxpayer dollars

 

[dan c]

The pension is actually an asset base from which you draw a retirement income from. That income is a mixture of investment earnings(dividends, rent, interest, CG's etc) and a return of capital.

Again, it's not a tax on the pension itself, it's a tax on EARNINGS in pension phase.

The problem I have is that the money in your super/pension has got there as after tax contributions, whether that be at the 15% contribution rate or after your MTR.

You have already paid tax on those assets, the government is double dipping. Investment earnings outside of super should be tax free as well but we don't live in a perfect world.

What you are forgetting is that the superannuation contribution, if taxed in the fund at 15%, has provided a tax DEDUCTION outside of superannuation.

The deduction is almost always at a higher rate than the 15% flat rate of tax in the super fund.

They are not double dipping at all. In fact, you would almost always be better off (just looking at tax) as the deduction you get would be higher than the tax you pay in the fund, on that contribution.

 

[dan c]

so in your opinion you be happy that the government stopped negative gearing, as well as taxing the earnings on your super at your MTR? perhaps we should all earn exactly the same, buy the same brown track suit and work for our glorious labour party?

This is the problem we now have as a country. One minor change to superannuation, which probably won't affect Greedy at all, and we get a reaction like this.

We have become a nation of whingers and lobby groups. We would be a lot better off if we a) think before we spoke (or typed) b) UNDERSTOOD something before we spoke or typed, c) dealt with facts, rather than hyperbole, and d) didn't whinge about everything.

But I digress...

 

[HiEquity]

If I put my salary in my bank / share account, it gets taxed at much higher rates than super contributions.

If the resulting balance in my bank / share account has any earnings in interest or dividends, it gets taxed at much higher rates than super earnings.

If I withdraw the money from my bank / share account to spend on whatever I like, I pay no tax at all on the withdrawal, just like super.

It's hard to make a case that income from any source should remain completely tax free. The impact on government finances would be too large.

Having said all of that, I never contribute to super above the compulsory level. The tax advantages are just not worth the lack of flexibility. I can't imagine what people are thinking when they contribute to super - it ain't for me. I value my freedom far more than just saving some tax.

 

[truong]

This is the problem we now have as a country. One minor change to superannuation, which probably won't affect Greedy at all, and we get a reaction like this.

Why? Because there’s no more trust in this government. Everything they do or say is no longer taken at face value by the people. In other circumstances a tax affecting such a minuscule number of people and bringing in a minuscule amount of money would be quite a simple matter.

But whatever this government does can now be expected to meet a lot of resistance, not because people are whinging more than before but because they’re more wary about real intentions, real cost and real outcomes.

Not being partisan here: I was one who voted for this mob.

 

[redwing]

This is the problem we now have as a country. One minor change to superannuation, which probably won't affect Greedy at all, and we get a reaction like this.

We have become a nation of whingers and lobby groups. We would be a lot better off if we a) think before we spoke (or typed) b) UNDERSTOOD something before we spoke or typed, c) dealt with facts, rather than hyperbole, and d) didn't whinge about everything.

But I digress...

The forum would be otherwise boring Dan

In all honesty I won't be seeing $100k earnings in my SMSF, or $200k earnings per annum with the wife; I'm just annoyed they keep changing the rules of the game

I'm now waiting to see what strategies individuals,teams, coaches and strategists come up with

Super is to tempting to the politicians and will be even more so in years to come. Compulsory super started in 1992 and now sits at more than $1.4 Trillion in total assets by 2013, nice growth and would make an awesome chart

mmm...super

 

[GaryT]

Don't forget that CGT is excluded from the definition of income for these rules for the first 10 years.

The changes sound very fair to me.

 

[austini]

In regards to putting money into Super or not it also depends on one's age. At 53 and able to access Super at 55 there is less legislative risk. More often than not grandfatering provisions are applied. However if I was much younger there is no way I would put anymore than the compulsory amount into Super.

Even then don't put all your eggs in the one basket.

 

[kurnol]

The pension is income, not CG! If you sell an investment asset, do you think you shouldn't have to pay tax on the gain? As I have stated earlier in this thread, the tax free pension, introduced as a cheap vote grab by the Liberals, should be abolished immediately. It is unsustainable and irresponsible on a par with Labor's crappy handling of money.

It is inevitable that it will be repealed. Just a matter of which side of the Laberals will end up mopping up the mess.

My whole point was about CG on assets being sold. No I dont think you should pay tax on a gain once retired. Regarding the "cheap vote" and "unsustainable and irresponsible" I always believed the tax incentives were introduced to encourage you to save, then hopefully you wont be a burden on society by running out of money before you die.

 

[Mr. Fabulous]

No I dont think you should pay tax on a gain once retired.

Why not? Do you think you're entitled to use taxpayer funded infrastructure post retirement? If so, then make your contribution. These costs don't magically stop just because you stopped working. In fact, retirees, self funded or not, are a HUGE fiscal burden on taxpayers and you want to make them (and eventually yourself) an even bigger burden?

Where is the money from lost tax revenue going to come from for this geriatric slush fund? Increased taxes on those still working?