Question 1. I have an investment property I am about to sell. I have owned it since the early 1990s. I will be paying capital gains tax. I am 70. I have a ‘comfortable’ amount in super with an industry fund and I own the house my wife and I live in. My wife has a small annuity, but we live entirely on my superannuation. We do not have any government pensions.
Can I use some of the profit from the sale of my rental house to add to my superannuation? If so, does that have any tax implications?
Yes, you can each make an after-tax non-concessional contribution so long as you are under the age of 75.
How much you can contribute will depend on your super balance as at 30 June of the previous year, as per the below table:
The above type of contribution does not attract any tax and forms part of your tax-free super component within super.
You could also look to make a personal tax-deductible contribution to super which would be helpful in reducing any capital gains tax. These types of contributions attract a 15 per cent contribution tax but as the name implies it allows you to claim a tax deduction on your tax return.
Therefore, if you have a large capital gain that would put you in a higher tax bracket than 15 per cent, this type of contribution could be worthwhile.
However, as you are over the age of 65, a work test must be met before you can make this type of contribution. The work test requires you to be gainfully employed (or self-employed) for 40 hours over a consecutive 30-day period.
If eligible and interested in this type of contribution I would recommend seeking tax advice.
Question 2. My wife and I are in our early 70s and retired with around $900,000 in an industry super fund. We will downsize into an apartment over the coming year. We may free up around $500,000, of which we intend to gift approximately 50 per cent to our kids. How can we put the remainder into our super? Advice will be appreciated.
Yes, you can contribute these funds to super.
There are two different mechanisms you could use.
Firstly, there is the ‘downsizer contribution’.
It doesn’t matter how much you already have in super, so long as you are over 60 (there is a proposal to lower this to age 55 but this is not yet law) and you have owned the home for at least 10 years you both can make a downsizer contribution of up to $300,000 each.
Note that the property must have been your principal place of residence for at least some of this period, and you must make the contributions within 90 days of settlement using an approved form.
You can only every make one downsizer contribution each. Interestingly, there is no requirement to actually ‘downsize’; you could upsize your home and if you still had spare money in your bank account you can still use this strategy.
Secondly, if you or your wife are under the age of 75 then you can make after-tax (non-concessional) contributions of up to $330,000 each, provided you have not utilised the non-concessional ‘bring forward’ rules previously.
Both these contribution types form part of your ‘tax free component’ within super.
Most industry funds offer super contribution advice at no additional cost, so it may be with speaking with them prior to making the contribution.
Finally, if you are in receipt of an age pension, gifting funds away will still be counted by Centrelink for the next five years.
Question 3. I’m 68, on the aged pension and my spouse is aged 64, not working. We are selling our investment house we part own with our son and his wife. Can we put $330k into my spouse’s existing super fund, which has about $60k in it? Thank you
Yes, so long as your spouse hasn’t previously triggered the bring forward rules, they can contribute $330,000 to their super.
Their super fund should be able to assist you with this.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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