Manage capital gains tax and boost your super
/If you make a gain on the sale of an investment, capital gains tax (CGT) can eat into your profits. But the good news is you may be able to use some of the sale proceeds to help you save on tax and grow your super. It involves making a super contribution and claiming a tax deduction to reduce your tax bill.
Here’s how it works
When you sell an investment for a profit, the taxable capital gain is added to your other income and taxed at your marginal rate, which can be up to 47%1 including Medicare levy.
But if you use some of the sale proceeds to make a super contribution and claim a tax deduction:
you can offset some (or all) of the taxable capital gain, and
the super contribution will generally be taxed at only 15% (or 30% if your income from certain sources is over $250,000).
By using this strategy, you may pay less tax on the sale of the investment. Also, once the money is invested in super, you can benefit from ongoing tax concessions. Earnings in super are taxed at a maximum rate of 15% (or 0% if you’re eligible to start a ‘retirement phase pension’).
1 Includes 2% Medicare levy
While this strategy has some potentially powerful benefits, you should seek tax and financial advice before going ahead, to ensure it suits your needs and circumstances.
