You could write off a lot of tax using your super using the 'Carry Foward' rule in Super.
Disclaimer: This is not advice and you must talk to a registered Tax Accountant about whether you can do any of this. I am not an Accountant and am providing the following as this is something I am personally working toward. Also, This is a hypothetical example only and is one of many strategies available to Aussies to help leverage available tax concessions on profits.
As you may or may not be aware, there is an annual limit on how much you and your employer can pay into your super fund each financial year, which includes your normal employer super guaranteed contributions plus salary sacrifice payments combined. That limit is currently $27,500 (concessional contribution limit).
That said, the 'Carry Forward' rule allows you to "bank" up to 5 consecutive years (max) of unused 'concessional contribution' limits, for example, if you and your employer contribute say, $12,500 in one year, then your "bank" will have $15,000 of unused. Over 5 consecutive years, that's $75k!. Obvi, payrises and inflation will affect this. But in this example, and assuming things remain flat, in year 5, you could make a one-off personal contribution into your super fund of $75k then claim a tax deduction on that whole amount. Say whaaat!?
Continuing the example - In Year 5:
Assuming your normal gross employment income at that time is $120k. Marginal tax rate + Medicare is 34.5%.
Assuming you sell a parcel of shares resulting in $150,000 profit. Profit is added to and taxed with your income - So, $120k income plus $150k profit = $270k taxable in your name, placing you right into the top marginal tax backet of 49%. Yikes!
However! Assuming your sold shares were owned for at least 12 months, the CGT discount of 50% applies allowing you to halve your profit as far as tax is concerned, reducing your total income to $195k. Still in the 49% tax bracket. Still a lot.
You could then take half your profit money, and make a one-off contribution of $75,000 into your super fund. Then when you do you tax return, the 'carry-forward rule will allow you to claim a tax deduction on the entire contribution! You've now reduced your income all the way back down to $120,000! Voila. Almost no tax on a pretty sizable profit.
"Almost no tax?" Your super fund will deduct 15% in tax from your $75k contribution. So there is still some tax payable there, but it's a helluva lot better than 49%, and it's paid outta super, not your own pocket so who cares. lol. Yes, I know, "but the money is locked away in super", it is, but you still have the other half to play with and it's virtually tax-free in your pocket. The other half will just have to wait for retirement.
Another disclaimer: Super and tax rules change a LOT, almost yearly, and the concessionals, tax rates, allowances, eligibility rules may throw this whole strategy out the window within 5 years. For those reasons, again, I stress, this is for example purposes only and not advice.
What do I know? You don't know me, I don't know you, so DYOR. GLTAH
IMU Price at posting:
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