Capital Gains Tax on Property with a SMSF

Here is an example of the difference in capital gains tax that can occur if a property is sold inside or outside superannuation.

Case study: Two couples

a)      John is married to Jan who both live in Queensland. They are both age 40 and looking to retire in 15 years at age 55. John currently earns $100,000 per annum. They own their own home. John purchases an investment property in Melbourne in his name for $450,000 outside of his superannuation fund. At age 55 they plan to sell it for $900,000.

The assessable gain will be $450,000. The CGT discount (50%) is $225,000.

Assuming he is at the highest marginal tax rate of 46.5% including the Medicare levy, the tax payable would be $104,625.This leaves a net gain after tax on the sale of the property is $345,375.

b)      Compare this to another married couple Steve and Carol, where Steve also earns $100,000 p.a. and they own their own home. They are both aged 40 and they decide to purchase a property investment using their Self Managed Super Fund for $450,000. They both plan to retire at age 55 and then start a pension and then sell the property for $900,000.

The assessable capital gain is $0 (as they sold it post starting an allocated pension). The CGT discount (50%) is $0. Tax payable on the sale of the asset is Nil. This leaves a net gain after tax on the sale of the property of $450,000 available for retirement so Steve and Carol end up with a total tax saving of $104, 625

Table 1-1

Property sold 15 years later

John and Jan

Steve & Carol ( SMSF)

Assessable gain

$450,000

$0

50% CGT Discount

$225,000

$0

Gain taxed at 46.5%

$104,625

$0

Net Gain post tax

$345,375

$450,000

Tax Saving

0

$104,625

Note: CGT calculation is based on the 50% discount method.

For more on SMSF's go to our Comprehensive Guide To SMSFs >>

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