Insights

Over the past financial year, we’ve witnessed a significant surge in property values across Australia. Whilst this boom has created new wealth for many Australians, it also presents important considerations for those looking to optimise their superannuation strategy—especially in relation to contributions, tax minimisation, and the structure of your fund.

Understanding Super Contributions: Concessional vs Non-Concessional

There are two primary types of contributions you can make to your super fund: concessional and non-concessional.

• Concessional Contributions

These are tax-deductible contributions and include both employer contributions (such as the Superannuation Guarantee) and personal contributions for which you claim a tax deduction.

For the 2024–25 financial year, the concessional contributions cap is $30,000. For example, if your salary is $100,000, your employer is required to contribute $12,000 (12%), leaving you with the potential to make a personal concessional contribution of up to $18,000.

If you’ve recently sold a property and realised a capital gain, making a personal concessional contribution could help reduce your taxable income. Furthermore, if you haven’t used your full concessional caps over the past five years and your super balance is under $500,000, you may be eligible to “carry forward” unused caps. This strategy could allow you to contribute significantly more in a single year—potentially up to $90,000—and reduce your tax bill by as much as $40,500.

• Non-Concessional Contributions

These are after-tax contributions and are not tax-deductible. The annual cap for non-concessional contributions is $120,000, but the bring-forward rule allows you to contribute up to $360,000 over a three-year period, assuming you’re under age 75 and meet eligibility criteria.

Although these contributions don’t reduce your taxable income, the earnings within your super fund—such as investment income and capital gains—are taxed at concessional rates of 15% and 10%, respectively. Over time, this can result in a much more efficient way to grow your retirement savings.

Downsizer Contributions

If you’re aged 55 or over as of 1 January 2023, and you’ve sold your primary residence, you may be eligible to make a downsizer contribution of up to $300,000 per person (or $600,000 per couple) into your super fund(s). These contributions are not counted toward your non-concessional caps, making them a powerful additional strategy for those nearing retirement.

The Property Boom and SMSFs: A Double-Edged Sword

For those with a self-managed superannuation fund (SMSF) holding property, the boom has led to higher valuations—sometimes significantly so. While this might look good on paper, it could trigger a number of complications.

If the property is the fund’s main asset and a pension is being paid from the SMSF, a rise in the property’s value may increase the required minimum pension payments. For example, the minimum drawdown rate for members aged 65–74 is 5%. If property values increase substantially, this percentage could represent a much larger dollar amount, potentially leading to liquidity issues. In extreme cases, trustees may be forced to sell the property just to meet pension obligations.

Planning Ahead

The intersection of rising property values and superannuation presents both opportunities and risks. Whether it’s making smart contributions to reduce tax or managing cash flow within an SMSF, having a strategy tailored to your specific financial goals is essential.

Let’s Make Your Property Gains Work for Your Future

At Altitude, we help clients navigate the complexities of tax and superannuation planning with confidence. Whether you’re considering property sales, making contributions, or managing an SMSF, we’re here to guide you every step of the way.

Contact your Adviser today to discuss how we can help you maximise the benefits of your property gains within your superannuation strategy.

Altitude Financial Planning is a Corporate Authorised Representative of Altitude Financial Advisers Pty Ltd
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