Question:
I would like to know how to reduce capital gains tax on investment properties by putting some of the proceeds into super. I sold an investment property in July 2010, which after the 50 percent discount has a CGT liability of $200,000.
Can you explain the process of putting the money into super to offset some of the CGT liability?
Answer:
The capital gains tax (CGT) is calculated by adding the net capital gain to your taxable income in the year of sale.
Therefore if you can reduce your taxable income by making a large deductible contribution to super you can reduce the amount of CGT payable.
If you do intend to put money into your super to reduce your taxable income, keep in mind the money must be received by the super fund before June 30.
Therefore you should make the contribution to your super at least two weeks before June 30 to allow time for processing.