Q. I am about to inherit a unit that was bought pre 1985 and was thinking of selling it and putting a one-off payment of $540,000 into super before 30 June 2017. Would I have to pay capital gains tax if the property was bought by my mother and it is transferred to my name at probate?
A. The amount of Capital Gains Tax payable when an inherited asset is sold depends on when the original owner purchased the asset and when the seller inherits the asset.
If the asset was originally purchased prior to 20 September 1985, the cost base of the asset for tax purposes becomes the value of the property at the date of death. For assets purchased after 19 September 1985, the cost base is the purchase price (including on costs) originally paid by the deceased.
The assessable amount for Capital Gains Tax purposes will be the proceeds from the sale of the asset (nett of expenses), minus the applicable cost base.
In your situation, the property was purchased before 19 September 1985 hence no Capital Gains Tax will be payable on the gain, provided that you are selling the property within two years of her death. If she died more than 2 years ago, the cost base for Capital Gains Tax purposes will be the value of the property at the date of her death. The assessable amount for Capital Gains Tax purposes will be the sales proceeds nett of expenses minus the appropriate cost base that applies. 50% of this gain will be added to your assessable income and taxed at your marginal tax rate.
Regardless of the date of purchase, if an inherited property was the deceased’s home and the property meets all of the exemption conditions required for a principle place of residence, then the property is sold with no tax payable on the gain. In order to qualify for this exemption, the property must be sold and settled within two years of death.
In terms of making a contribution into Superannuation, from 1 July 2017 the Non-Concessional Superannuation Contribution cap has been reduced to $100,000 per annum from the current limit of $180,000. Up until 30 June 2017, it will be possible to make a Non-Concessional contribution of up to $180,000 for one year or to “bring forward” three years’ contributions ($540,000) provided you are under age 64 as of 1 July 2016.
If you do not use the full limit of $180,000 or $540,000 in the 2017 Financial year, then you will be limited to the $100,000 annual and $300,000 “bring forward” caps from 1 July 2017. If you trigger the “bring forward” cap by exceeding the $180,000 contribution cap prior to 30 June 2017 but do not take up the full “bring forward” limit of $540,000, then you will be subject to transitional “bring forward” rules. The transitional “bring forward” cap will be $380,000 in aggregate including contributions received in this tax year and applies to future contributions within the 2018 tax year and 2019 tax year. As 3 years will have expired following the 2019 tax year, your “bring forward” cap will recommence under the new rules from 1 July 2019.
If you were age 65 on 1 July 2016, you would be ineligible to utilise the 3 year “bring forward” and you would be limited to the 1-year Non-Concessional limit. Non- Concessional Contributions may only be accepted by your fund if you satisfied the work test; working 40 hours in a 30 day period prior to making the contributions to Super.