Q. I see from Andrew Main’s Winners and Losers that Capital Gains Tax (CGT) will increase to 49% once your income exceeds $180,000. I am considering selling shares from which there is a considerable capital gain so as to move the money into my SMSF. Based on what I understand it would be best to do this before July 1st – is this correct? (I have already contributed $150,000 this year)
A. Assuming your Taxable Income next Financial Year will continue to be greater than $180,000, if you wish to avoid the increase in the rate of Capital Gains tax, then you would be wise to look to crystallise the gain this financial year.
Effective 1 July 2014 the Medicare Levy increases from 1.5% to 2% and as a consequence of the Temporary Budget Repair Levy (TBRL) an additional 2% will be levied on Taxable Income as well. In aggregate the tax increase will be 2.5% from 1 July if your Taxable income exceeds $180,000.
Note there is no change in the treatment of Capital Gains Tax (CGT). For individuals, CGT is levied on 50% of the gain at your Marginal Tax rate.
I would however not make the contribution to Superannuation until after 1 July 2014. Assuming you are under 65, if you made the contribution on or before 30 June 2014, you would trigger the 3 year bring forward rule this Financial Year for your Non-Concessional Superannuation Contribution. You would be limited to an addition contribution to Superannuation of $300,000, as you have already contributed $150,000 this Financial year. You would also be unable to make an additional after tax contribution to Super until 1 July 2016.
If you delay making the contribution until 1 July 2014, the Non-Concessional Contribution cap rises to $540,000 and the contribution you made this financial year would not count. You would then be eligible to commence additional after tax contributions to Super from 1 July 2017.
By delaying the contribution, you could get an extra $240,000 into your Superannuation fund. Please be careful, if you exceed the $150,000 cap by $1 the bring forward provisions are triggered at the lower cap of $450,000.