I own no investment properties or trusts. Will the budget affect me?
My financial situation is quite simple. I do not have any investment properties or foundations. I paid off my house and focused on getting my super balanced. I am 67 years old and comments about the budget were that it was about transferring money to younger people of my generation. But I can’t see what’s changed for me. What did I miss?
Don’t worry, you haven’t missed anything. Pension rules have not changed, meaning you can continue to have a tax-free pension of up to $2 million after you retire. In fact, if you’re lucky enough to exceed that amount, you may have another million dollars in there that’s only taxed at 15 percent.
There is no change to the capital gains tax exemption at your primary residence. There is a small change to the private health deductible calculation but I doubt it will have a significant impact on you.
There are also some improvements in elderly care services that may be important to you later in life.
I have an investment property that I’m looking forward to getting rid of; I’m tired of headaches. I was waiting until I retired in about two years to minimize capital gains tax. Should I go ahead with these new rules in the budget and sell now?
It’s definitely something to discuss with your accountant. This depends on what your current income level is and the size of the capital gain you will experience.
Of course, the purpose of the minimum 30 per cent tax payable on earnings is to significantly reduce the benefit of the timing strategy you are currently working on, and so there will be situations where there is no longer any value in delaying the sale of an asset until a low-income year, as has been the typical approach so far.
I have an investment property in my SMSF that I bought 12 years ago. How do the new CGT rules affect me?
Here’s an easy one. They don’t affect you. Pensions continue to benefit from a one-third CGT reduction for assets held for more than 12 months.
I’ve seen mention of a period when you can restructure family trusts given the proposed changes. Do these mean you can remove assets from a trust and put the assets into the superannuation fund without triggering CGT?
The budget includes a three-year period for the restructuring of family foundations. There is reference to moving assets into company assets, so my impression is that there will be the opportunity to change the ownership of assets without triggering CGT, but we will have to wait for further details.
There may be an opportunity to shift assets into super as an intra-species transfer, but there is no proposal to relax the normal contribution caps, so it looks like you will have to work within those limitations.
I am 71 years old and own some CBA shares that I purchased publicly. I was planning to sell $20,000 worth of these later this year to help with an overdue car replacement. Will I now have to pay 30 percent capital gains tax on this sale?
The proposed changes will not take effect until July 1, 2027, so selling these shares later this year will not fall under this new measure. It is also worth noting that if you receive an age pension, you are exempt from this minimum 30 percent tax rule.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. Questions: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
