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Using the CGT discount

A capital gain is a profit made from the sale of an asset, for example, real estate investments (the family home is exempt), a business or shares. Your capital gain is calculated as the difference between what you paid for the asset and what you eventually sold it for. A capital gain is considered by the ATO as part of your assessable income and is taxed at your marginal rate.

There is, however, a discount that may be applied to capital gains. If you have held the asset for over twelve months, you may be eligible for a 50% discount on the CGT. The CGT discount is also available to trusts and superannuation funds, although for superannuation funds the discount is only 33.3%. The discount is not available to companies.

Of course, there are occasions where you may have to dispose of an asset for less than you originally paid for it. Unfortunately, you are unable to use ‘capital losses’ to reduce your assessable income. However, you are able to carry the loss over to the subsequent income year and use it to offset future CGT liabilities.

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Investing in shares vs property in SMSFs

March 19, 2020

Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.

While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.

It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.

Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.

Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.

Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.