Sale proceeds directed to Superannuation?

[wylie]

My hubby has just turned 50. If he sold an IP could he place some of the sale proceeds into his super to lessen the capital gains tax due on the profit?

There used to be something about being able to put $150K into super per year, or $450K one year and then nothing for the next two years. I am sure this has all changed now though.

I do know he can salary sacrifice a maximum $50K per year (including his employer's contributions) but don't know about the "one off" deposit from sale of an IP.

Eg, say his PAYG earnings this financial year would be $80K and the capital gain on the sale is $200K, could he put $150K into his super account, so his income is $80K plus $50K gain that is left after the rest goes into super? If he cannot do this, his tax will be high as his gain is added to his PAYG.

I asked this question of a young chap from our super fund and he said "only if he is self-employed". That didn't sound right, but I am not sure.

We would certainly get "proper" advice, but to help with my mental gymnastics this weekend, I thought I would ask the forum members.

We are not sure whether to sell his share in this IP, and the tax implications are one of the factors that will help us to decide.

 

[Pushka]

Hey Wylie. I am no accountant but think I have bad news. The only thing you can do is to minimise salary and direct all your payg into super as a salary sacrifice and then pay the tax rate for amount of profit you realise for the sale of the IP. You can't escape CGT by directing the proceeds of the sale into super. Remember the 50% discount if held for over a year and also that depreciation comes into the equation too.

You can still do those top ups into Super(amount depends on your age) they just won't change your CGT liabilities. If you did do the top up you might need to ensure you don't run out of cash to pay your tax bill!
We had to work this out a few years ago and the tax paid was way more than we thought it would be because of depreciation. And unless we received no payg that year there is no way to reduce the rate.

Which really means your superadvisor friend was right.

 

[wylie]

Thanks Pushka. We don't need to part with this IP this year, and I am tempted to just hold it until hubby retires. I was just sure I heard differently about the superannuation idea.

If we sell it to my parents' family trust, we don't lose the future capital gains but it would free up some money to reduce loans, and possibly develop our double block. I am therefore pondering a few "what if" scenarios.

I must admit though, that I tend to hear things and don't listen too hard if they don't impact on me. When I heard this super stuff, we had no thoughts of doing this, so I only listened with one ear .

Doing different "what if" scenarios keeps my brain active, but I get frustrated when I don't know the answers.

 

[marg4000]

Wylie, the rules HAVE changed.

This year you can only contribute $50K to super and have it tax deductible, and then only if you are self employed and can claim a deduction. I think the $150K a year applies but that amount is not tax deductible so won't help the tax situation.

Hubby was in a similar situation last financial year. We knew he had a big CGT amount, and he is not eligible for super deductions as he is a paid employee. So he salary sacrificed to the max ($100K then) and we lived on his somewhat meagre remaining pay, my pay, plus an occasional top up from the capital gain.

I think the best your hubby can do is to salary sacrifice to the max to reduce his income.
Marg

 

[wylie]

Thanks Marg. He is sacrificing $1K per week right now, but we need to ensure that his sacrifice amount plus his "regular" employer super don't go higher than $50K or he will be taxed at something like 48 cents in the dollar on anything over $50K.

Boy...... you have to watch every angle.

 

[marg4000]

For that reason we got hubby's work to salary sacrifice $95K on the off chance that it would be a financial year where there were 27 fortnightly pays which happens every so often.

Fortunately for us hubby's pay is all added up into a "package" so we were able to nominate the $95K as an "all-up" super figure.

Your hubby's pay office should have software that tracks his super contributions, possibly a financial year total is shown on his group certificate. Just keep an eye on it in April/May and see how you are going. If necessary he can always stop the sacrifice when it nears the %50K.

Yes, it is a bit messy but very worthwhile. We figured we saved around $30K after taking the 15% contribution tax (ouch!) into account.
Marg

 

[Pushka]

Like I said though, make sure you will have enough cash to pay any CGT liabilities. No use sacrificing all your salary into super if you needed money to pay your tax bill! Or even eat!

 

[marg4000]

And make sure that you arrange for your tax return to be submitted as late as possible. In our case we sold in July 07 and actually paid the tax in May 09. Close to two years CGT in an offset account earned us thousands in reduced interest.
Marg

 

[wylie]

Like I said though, make sure you will have enough cash to pay any CGT liabilities. No use sacrificing all your salary into super if you needed money to pay your tax bill! Or even eat!

Agree this is important. We would have sale proceeds to pay cgt with but would need to find the balance of leaving enough to reduce the loan to allow for the fact that rent would stop from the sold property ..... Hence the "what if" scenarios running through my head.

 

[wylie]

And make sure that you arrange for your tax return to be submitted as late as possible. In our case we sold in July 07 and actually paid the tax in May 09. Close to two years CGT in an offset account earned us thousands in reduced interest.
Marg

Agree with this too. We would plan similarly