Selling an investment property can be rewarding, but many owners are caught off guard by the size of the capital gains tax bill that follows. Senior Financial Adviser at Highview, Bruce Chisholm, explains that for those already on higher incomes, the extra gain from a sale can push them into an even higher tax bracket and result in a far bigger payment to the ATO than expected. The good news is that with the right advice, there are strategies available to reduce this impact and turn a potential tax burden into a financial advantage.
One recent Highview client case shows just how powerful the right strategy can be.
CASE STUDY
Chris and Alex have been considering selling their investment property but were worried about the size of the capital gains tax (CGT) bill. On top of that, their business income is around $135,000 each, which already has them sitting in a higher tax bracket.
The numbers:
- Sale price (after costs): $1,000,000.
- Cost base: $600,000.
- Gross capital gain: $400,000.
- CGT discount (50%): $200,000 taxable gain.
- Split between Chris and Alex: $100,000 each added to their income.
With their regular business income plus the gain, both would tip into the top tax bracket. The expected tax bill on the gain was $42,600 each — a combined $85,200.
The strategy:
Meeting with a Highview Financial Adviser, Chris and Alex discovered they had unused carried-forward concessional contribution caps from prior years. They were both eligible to contribute $100,000 into super and claim the amount as a tax deduction.
This strategy completely offset the $100,000 gain each would have paid tax on.
The outcome:
- Personal tax avoided: $85,200 (combined).
- Super contributions tax: $30,000 (15% of $200,000).
- Net tax saving: $55,200.
By using their carried-forward concessional contributions, Chris and Alex reduced their overall tax liability significantly, while also boosting their super balances.
This case is a great reminder that the right advice can make a huge difference when planning a property sale. With the right strategy, it’s possible not only to minimise tax but also to strengthen your long-term financial position.
Important note:
There are strict rules around eligibility and conditions to make concessional contributions & claim a tax deduction. Personal advice is essential before taking action.
Written by Bruce Chisholm, Senior Financial Adviser
Authorised Representative No. 1235025 of Highview Wealth Solutions (Aust) Pty Ltd (AFSL No. 546561)
Disclaimer: This article has been prepared for general information purposes only and does not constitute personal advice. It has been written without considering your personal objectives, financial situation or needs. You should not act solely on the basis of this material. We recommend seeking formal advice that is tailored to your individual circumstances.
