Paying into super to claim CGT reduction

If you have made a capital gain during the financial year, making a personal contribution to super can help reduce the tax payable on the capital gain. If you are eligible, you can claim a deduction for the personal super contribution, which reduces your taxable income and may therefore reduce the overall tax payable, including tax arising from a capital gain. To claim the deduction in the current financial year, the contribution must be received by your super fund by 30 June of the year you sold the asset, not the year you complete your tax return. Make sure you allow a few days for the payment to be processed into your super fund.

After making the contribution, you will generally need to lodge a Notice of Intent to Claim a Deduction with your super fund and receive confirmation before claiming the deduction in your tax return. Before making the contribution, it is important to check your available concessional contribution limit and ensure you are eligible to claim the deduction. This can be a useful tax-planning strategy when you have a significant capital gain and want to increase your retirement savings at the same time.

Example: John sells an investment property and makes a capital gain of $100,000. Rather than paying tax on his full taxable income, John makes a $20,000 personal contribution to super before 30 June 2026 and is eligible to claim the contribution as a tax deduction. The deduction reduces John’s capital gain to $80,000, which will reduce the amount of tax payable on his capital gain.

The exact tax saving will depend on John’s other income, the capital gain, his eligibility for the deduction and his super contribution limits. It is important to obtain tax advice before making the contribution to ensure the strategy is suitable.

Author

Natasa Briffa