Proposed changes to capital gains tax (CGT) announced in this year’s federal budget are likely to reduce the viability of personal deductible contributions for some super fund members, but may elevate pension strategies for others, a technical manager has noted.
Institute of Financial Professionals Australia (IFPA) head of technical Stuart Sheary said plans to replace the current 50 per cent CGT discount with cost-base indexation for assets held for more than 12 months and a minimum 30 per cent tax on gains did not extend to superannuation, but altered contribution strategies.
“On the portion of a gain relating to growth post 1 July 2027, that amount will be subject to the minimum tax, which can have implications moving forward, particularly for making personal deductible super contributions,” Sheary said in a briefing to IFPA members today.
“Typically in the past, where we had someone who had realised a large capital gain, we would recommend making personal deductible super contributions or perhaps use the catch-up concessional contributions in order to bring their tax bill down to zero.
“With a 30 per cent minimum tax, that’s going to affect those recommendations because we are not going to bring down their tax rate to less than 30 per cent. There’s no point because the gain is taxed at that minimum rate of 30 per cent.”
He pointed out those in receipt of an income support payment, such as an age pension, would not be subject to this rate of tax on realised capital gains after 1 July 2027.
“There could be a rise in popularity of strategies to try and get at least a part age pension, such as gifting within the rules or investing in exempt assets like the family home or perhaps sheltering assets inside a younger spouse’s superannuation fund,” he added.
“They are all strategies that some advisers already consider when trying to get at least a part age pension.
“With the legislation [before parliament], it does say you only need to be in receipt of an income support payment at any time during the financial year in order for that 30 per cent CGT tax to not apply. In other words, the capital gains would be taxed at marginal rates, which might be less than 30 per cent.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
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