Opinion
We’re selling our holiday home - can we put the proceeds into our super?
Paul Benson
Money contributorMy wife and I are selling our family holiday house and hope to settle in January. We would like to put as much of the sale into our self-managed super fund and believe we could add $120,000 each before we are 75. My wife turns 75 in April, and I will be 75 in February. Somebody has suggested that I could add three years of contributions, ie $360,000. Is this correct? Would these contributions have any implications for the capital gains tax (CGT) on this sale?
Thanks for your question. This sounds like a good intention. The more of our wealth that can be held within the tax-favoured superannuation environment the better, particularly up to the $1.9 million transfer balance cap.
A super top-up using the proceeds of your holiday house sale is possible - just don’t over-egg it.Credit: Simon Letch
Given your proximity to turning 75, it is worthwhile being clear on the timing around potential super contributions. You can make concessional (tax-deductible) contributions no later than 28 days after the end of the month in which you reach age 75.
The fund has to receive the payment within that 28 days, so practically, you would need to do it a few days earlier. Given you turn 75 in February, you would therefore need to have made any intended superannuation contributions before March 28. These contributions may help with CGT.
The next consideration is whether your total superannuation balance at June 30 was less than $1.9 million (individually). If it was, then in addition to the concessional contributions mentioned above, you also can make non-concessional contributions.
If your super balance at June 30 was under $1.66 million, you may have access to the full three years’ worth of non-concessional contributions, provided you have not already triggered this.
This would enable super contributions of up to $360,000 per person. You can check your status in this regard within your MyGov account. For balances between $1.66 million and $1.9 million, a graduated cap applies.
Non-concessional contributions would have no bearing on your CGT liability as they are not tax-deductible.
Bear in mind the information I’ve provided is based on the limited information you’ve sent. We’re talking about quite significant amounts of money here, so I strongly encourage you to discuss this with your financial planner before making these contributions.
Approximately half my retirement income is derived from a Centrelink age pension. The rest is from a superannuation account-based pension. When I report my gifting to Centrelink, do I apportion that gift according to where my income is sourced, or should I include the total gift amount?
You should include the full amount that you gift and not apportion it.
A common misconception is that there is a restriction on how much you can gift once on the pension. In fact, it’s your money, and you are free to gift whatever you wish.
Where you gift more than $10,000 in an individual year, the sum above this $10,000 threshold will simply continue to be considered yours for five years when calculating your means-tested age pension. Note that there is also a cap of $30,000 over a five-year window. These rules exist to ensure pensions are paid only to those who need them.
Exceeding these caps therefore makes you no worse off, since had you not provided the gift, you would have continued to own the asset, and therefore it would have been counted anyhow.
Paul Benson is a certified financial planner at Guidance Financial Services. He hosts the What’s Possible? and Financial Autonomy podcasts and writes the GainingCHOICE email newsletter. Questions to: paul@financialautonomy.com.au
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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