There has been a lot of reaction to the budget that was presented on Tuesday 12 May.
Most of the big changes were already announced previously but until they are legislated, we can’t be sure exactly what the new rules will be:
- New negative gearing arrangements will be restricted.
- Capital Gains Tax (CGT) will revert to the old system of CPI indexing the cost base starting from 1 July 2027 and be taxed at a minimum 30%.
- Family Trust distributions will be taxed at a minimum 30%.
The new arrangements for CGT will be significantly more complicated, but we have software that can help get it right.
If your taxable income is less than $45,000, it might make make sense to sell assets to realise capital gains before 30 June 2027.
It is likely that most investors will avoid buying existing properties going forward. This could make it hard to sell a property or reduce the selling price. If prices fall, there will be pressure to reverse the change.
Superannuation is still the best option
The important point to note is that there have been no new changes to Superannuation taxes.
It is still possible for a couple to hold up to $8 million of investment assets and pay no more than 15% tax on income and 10% on capital gains.
The optimal structure is now:
Partner 1 Partner 2
Pension Account (0% tax) $2,000,000 $2,000,000
Accumulation Account (15% tax) $1,000,000 $1,000,000
Personal Investment $1,000,000 $1,000,000
Total Investment Assets $4,000,000 $4,000,000
Based on these figures it is possible to generate a total income of $390,000 and only pay $25,000 of income tax.
So that is the ideal structure but unfortunately it is not so easy to get to that position. It requires a lot of long-term planning and many small decisions that add up to a much larger total.
