Withdrawing money from super and having your spouse recontribute it to their super can be an effective way to avoid or minimise capital gains tax.
Q: My wife and I have a self-managed super fund in accumulation mode and have been self-directed investors since its creation some 20 years ago. She is aged 58 and recently retired. I am 61 and still working full time. Her balance is about $1 million, and I have close to $3 million. We would like to transfer our super to a not-for-profit fund such as Telstra to simplify our super administration.will need to sell all the assets and convert them into cash to facilitate the transfer between funds.
That said, this entitlement applies only to pensions described as retirement phase pensions and not the category known as transition to retirement pensions, as the latter don’t give the fund any CGT relief. One thing you are right about, says Heffron, is that the $3 million size of your super account balance means it will be difficult to avoid CGT altogether given you can only move $1.7 million into a retirement phase pension.
What a TRIS allows you to do is start an income stream that can pay you a maximum 10 per cent of the TRIS value as income. As someone who is over 60 this income will be tax-free.You could therefore start a TRIS with the full $3 million of your super and withdraw up to $300,000 a year tax-free. Once you and your wife have either retired or turned 65, says Heffron, you will each be able to put $1.7 million into a retirement phase pension. If you’re planning to move to a public offer fund but want to do this at the right time to minimise tax, this might be it, she says.
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