The CGT changes announced in this year’s federal Budget look set to affect one very popular retirement strategy.

For pre-retirees, one way to reduce tax payments has been to offset capital gains, such as the profit from an investment property sale, by depositing those gains into superannuation. The benefit comes from catch-up super rules that allow for a one-off tax-deductible contribution of about $140,000 per year, where concessional contribution caps have not been used in the previous five years. This has been an effective superannuation strategy for those with a low income but significant capital gains.

The new CGT rules, however, mark a return to the inflation-based cost base indexation framework that defined the original 1985 to 1999 system. Under the new approach, tax applies to any capital gain as a first step and cannot be reduced through other tax initiatives. Where a taxpayer does not have sufficient income from other sources, this will heavily reduce any benefits.

While this may come as a shock to some investors, it’s important to remember that the CGT changes do not come into effect until next year and apply only to gains made after 30 June 2027. Any capital gains made before that day are taxed under the current system and include the 50% discount.

That gives you time to plan. At Newealth, we can provide full details on how the CGT changes may affect you, so you have clarity around your investment strategy. For a confidential call, please contact us.

General Advice Warning:

The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
Newealth Pty Ltd ABN 61 091 100 275 | AFSL 231297