Question 1. I have had CBA shares since their inception (around 1991?). I have no record of my original share portfolio. How do I know how much capital gains tax I need to pay if I sell them?
I recall, as a young CBA teller in 1991, that the initial CBA offer price was $5.40 a share. Unfortunately, I was saving for my first home and didn’t buy any.
At the time or writing they are hovering at just over $100 a share. Another way of looking at it is that they have appreciated circa 1750 per cent over the last 31 years. And that does not include dividends!
If you were participating in a dividend reinvestment plan, i.e. instead of receiving the dividends as income paid to you, you used this to automatically reinvest to buy more CBA shares, then the CGT calculation is a little bit more tricky. Nevertheless, if individuals don’t need the additional income, dividend reinvest plans are generally a good idea as they are an automatic way to save and invest, which compounds your returns.
Coming to your question directly, if you still have all of your records, including all of your dividend reinvestment details, you could record this information on a spreadsheet or the ATO’s CGT record-keeping tool to help you work out the capital gains tax.
Alternatively, it may be far easier to contact an accountant to reconstruct the past history of the portfolio for you. They should have access to specific software that can easily and quickly calculate amounts of dividends that were paid, reinvested, purchase price and resulting gains.
This service should not be expensive, and as it will assist you in managing your tax affairs this should be tax deductible.
Question 2. Hi. I am 64. I bought an investment property 20 months ago, have rented it out for the past 12 months, and have just sold it and made $240k profit (I have deducted the cost of renovating and the real estate/legal fees involved with selling. For the year I rented it – after expenses – I made $590 per week. This was my only income for the year. (I lost my job a few years ago. And I have only paid $1000 into my super account in the past five years (I have $49k in my super total). How much of the profit from the sale can I put into super to minimise my capital gains/tax bill? Many thanks, Elizabeth
Hi Elizabeth – that’s a very handy profit you have made.
As you have held the investment property for over 12 months you should be eligible for a 50 per cent discount, meaning that only 50 per cent of your capital gain (after taking into account your increased cost base as outlined) is taxable, in this case $120,000.
This would be added to your tax return and included with your other assessable income.
Given your situation, making tax-deductible contributions to super is a great way of saving for retirement and minimising your income tax.
As you are under 67 no work test needs to be met in order for you to make these types of contributions.
The standard cap on concessional super contributions (which personal tax-deductible contributions are part of) is $27,500, however, as you have a super balance below $500,000 you can use concessional contributions that have been unused in the past.
This is called ‘carry forward’ concessional contributions. This increase to your concessional cap could be substantial as you haven’t been working within the last few years.
To check this figure login to MyGov account, through to the ATO portal and select ‘Carry-forward concessional contributions’ as shown below:
I recommend speaking with an accountant or financial adviser to determine the optimal amount of personal tax deductible contributions you should make. Once this is maximised you can also look to make after-tax non-concessional contributions with any leftover proceeds.
3. Three years ago I gifted my son $100,000. I am on the age pension. Soon he will be returning that amount. At the time I gifted the money, I informed Centrelink about what I had done. All good by them. I was advised by Centrelink to inform them straightaway when I finally received my money back. How do I go about this transaction being a gifted amount as regards income tax?
In relation to Centrelink, they currently will count the loan as a financial asset under the asset test and, if it is an interest-free loan, deeming that amount under the income test.
Once the loan is repaid to you, then Centrelink will cancel the above, but if you then place the funds in a bank account or similar, then they will again be asset tested and deemed. So, in effect, no net change.
From a tax perspective, the repayment of the loan to yourself is a return of capital and should not have any tax consequences, however, you should confirm this with your accountant.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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