A reader with a capital gain after selling an investment property is reminded how CGT is calculated and that the extra super tax is not as onerous.
Q: My question is about the 30 per cent penalty tax on some super contributions and whether it makes it worth contributing anything at all when you are older. The capital gain from the sale of a rental property will push me into this high-income tax bracket for the first time. It will mean me having to pay 30 per cent tax on any concessional super contributions I make. In addition, when my super is paid out, I face seeing any death benefits paid to my adult children taxed at 17.5 per cent.
What you are referring to, says Fry, is an investment gain that will lift your income to a level where it exceeds $250,000 in a financial year, making you liable for what is described asThis is an additional tax payable on tax-concessional super contributions if your taxable income, including your concessional contributions, exceeds $250,000.
That’s not to say this will automatically happen if your taxable income exceeds $250,000 and you contribute $27,500 to super. For example, say your taxable income is $240,000 and you contribute $27,500 to super, your total adjusted taxable income will be $267,500 – $17,500 greater than $250,000.To be up for the maximum Division 293 tax, you will need income that is well above $250,000. Say you earned $300,000 and contributed $27,500 to your super, your total adjusted income will be $327,500, which is well over $250,000.
Regarding your profit on the property investment, says Fry, it will need to be a substantial gain to push you into Division 293 tax given you will only be paying tax on half the capital gain after theSo if your taxable capital gain pushes your income well above $250,000, you will still be nearly $5000 better off making a super contribution, says Fry.
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