Capital Gains Tax & Concessional Super Contributions for Self Employed/Sole Trader

mrvaluepack on 22/07/2022 - 21:39

Just wondering how this all works and how its calculated.

Lets say I triggered a $500k CGT event for the financial year (eligible for 50% discount) and in order to try and minimize tax, I choose to max out my super concessional contributions.

Lets also say my concessional cap is $100k for the financial year (accumulated from years before).

What will be my Taxable Income for the financial year? Assuming no other deductions or income.

A)
$500k - $100k = $400k
$400k ÷ 2 (after cap gains discount) = $200k

OR

B)
$500k ÷ 2 (after cap gains discount) = $250k
$250k - $100k = $150k

Any help or advice would be appreciated. Thank you.

Financial Taxation

Comments

  • bcarp on 22/07/2022 - 22:00
    +3

    These aren't exactly small amounts of money. Sounds like the help & advice you need should come from a professional accountant.

    • mrvaluepack on 22/07/2022 - 22:43
      +1

      Its a simple calculation though. Just need to know which ones first.

  • bobbified on 22/07/2022 - 22:22
    -1

    Lets say I triggered a $500k CGT event…

    Makes a $500k+ gain and can't afford professional advice (which can be claimed as a deduction too)!. lol

    • mrvaluepack on 22/07/2022 - 22:42
      +1

      Lol, free advice first then pro advice later.

      • bcarp on 22/07/2022 - 22:54

        In true OzBargain style!
        In general terms, I think of it like this. In the case of an uncertainty, the right answer is usually the one that works out better for the taxman & worse for me.
        However, I think you'll find that this might be the exception to my rule of thumb.

  • tsunamisurfer on 22/07/2022 - 22:54
    +5

    It's B. Why would you use your concessionals to reduce your CG then apply the 50% discount/

    Both are standalone items.

    $250k in CG

    Gross income is $250k

    Less deductions of $100k

    = $150k Taxable Inc.

  • thirtysixd on 23/07/2022 - 09:13

    In terms of minimising tax

    Since you are self employed why not look for business related deductions?

    • mrvaluepack on 23/07/2022 - 12:12

      Its more of not working and passive investment income. So not much other deductions to be made.

  • AndyC1 on 23/07/2022 - 09:24
    -1

    What did your accountant say when you asked them?

  • johndowy on 23/07/2022 - 10:38
    +2

    B

    Capital gains can only be reduced by a capital loss.

    The super contribution is deducted on your taxable income which would happen after the 50% discount.

  • FiscalSleuth on 23/07/2022 - 13:24
    +1

    1. I'd be checking your capital gain is eligible for discounting

    2. Check your $100k into super cleared before 30 June and is eligible. Then complete a notice of intent to claim form

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