Yes, this is true, it depends a lot on age, general income and size and length of holding.
Assume you have purchased RAC at $1 per share, and held for more than 12 months. Price today is $3, and lets say price at Xmas reaches $10.
- Option 1 : Hold personal shares until xmas, then sell. Tax would be a maximum of about 23% (but likely somewhere around 17%) on $9 per share profit (paid by the individual at the end of this financial year).
- Option 2 : Sell today to SMSF, then sell from SMSF at Xmas. Tax would be in two parts - up to 23% on the current $2 profit (paid by the individual a the end of this financial year), then 15% on the $7 profit in the SMSF holding (paid by the SMSF at the end of this financial year)
How big a difference that makes depends on size of holding. The tax savings get much (much) larger the higher the RAC price eventually goes - with the obvious downside that any profit is locked in the SMSF until retirement.
One of the few advantages of getting old, once you pass 60 any profit in SMSF held shares is tax free if you trigger retirement. But personal shares would be taxed like any other income even after 60, even after retirement. That means if you're nearing 60, the SMSF option could be a massive tax saving.
All of the above is based on the assumption that RAC will grow dramatically over the next 6 to 12 months. I'm happy to work with that theory,
RAC Price at posting:
$3.05 Sentiment: Buy Disclosure: Held
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