The Mortgage Choice franchise, Australia’s leading mortgage broker, would like property owners to consider looking before they leap into action and sell their investment property/ies simply to take advantage of the pre 1 July 2007 superannuation contribution policy.
It is a good idea to thoroughly assess your situation before selling off an asset that could make significant financial gain for you in the future, especially at a time many are saying is the bottom of the property cycle for some states.
Up to 30 June this year you can make a $1 million contribution to your superannuation fund (per annum). After that date, the contribution will drop to $150,000 or less per annum with an allowable limit of three year’s worth of contributions at once.
National financial services franchise corporate affairs manager, Warren O’Rourke said people should think about exactly how smart it is to be paying costs now for some (possibly) tax-free superannuation later.
“If you are selling property to take advantage of the soon-to-be-changed contribution limit you need to weigh up the benefit of that against paying capital gains tax and various lender, legal and other fees now. Especially as government policies tend to change over time,” he said.
“More importantly, you need to think about the seven to ten year property cycle and how much value that property or properties could add to your financial portfolio in the long term.
“This is especially true now, at a time where many are saying we are moving towards another upturn in the property market. You never know what can happen – we could be heading for another ‘boom’ that these property owners will miss out on profiting from”.“Think long and hard about how other tax benefits financial strategies such as property gearing can benefit your portfolio for the future.
It is an extremely important decision that should be made very carefully, and input from your accountant and financial advisor is a must.
You should also note that when you sell to make a substantial contribution to a retirement fund, depending on your circumstances, Centrelink may penalise you in terms of access to its age pension.
Either way, property equity is a crucial part of retirement funding for many people. It is simply a matter of when to take advantage of it to create the best situation for yourself in the short or long term, depending on what’s important to you.
13-Apr-2007