Superannuation Discussion + market volatility

[andye]

No, and it ought not be

It’s because cashflow actually matters.

Where do people who borrow funds to pay for an asset find cash to pay tax?
That was the issue with employee share schemes. It’s all well and good to say “pay up” but how exactly do people do this when the money is tied up in an asset ?

I'm no fan of taxing unrealised gains but it's probably not great financial practice to have a really large proportion of assets in an undiversified illiquid form

 

[Brissy1]

optimistic valuers

Like Dr. shopping?

 

[andye]

If CGT wasnt grandfathered that way, there would likely be a tsunami of sales prior to July 2027.

This is assuming the Greens don't manage to limit the grandfathering in the Senate

I tend to think there will be a meaningful fall in property prices ( in Sydney at least) at some point over the next couple of years, but if the changes became retrospective, it could be much more

 

[SYD]

I tend to think there will be a meaningful fall in property prices ( in Sydney at least) at some point over the next couple of years, but if the changes became retrospective, it could be much more

Along with increasing rents as supply dries up…

 

[Mr_Tee]

All of this recent discussion on CGT implications is great and informative.

The common focus of discussion seems to be on selling an asset sooner rather than later to escape the new CGT regime. And that’s great.

However, once you have sold that asset you have a pile of cash. Then what do you do? You still need to invest in something to get some growth so your asset base doesn’t suffer diminishing value from the effects of inflation. So your choices broadly are to:

1. Stay in cash,
2. Put as much as you can into super to get the benefits of lower tax rates in super,
3. Buy a bigger Main Residence which remains tax free in all respects, or
4. ReInvest outside of super (in say personal names) and Lo and behold you are back in that new CGT regime that you set out to avoid in the first place.

If you choose option 4, then I’d ask why on earth did you sell in the first place, as you have paid CGT at the old rates, incurred significant transaction costs on both the sell and buy transactions and yet here you are now in the new CGT regime, with a capital base that has been eroded by tax and transaction costs. What was the point of it all?

If you have a longer term view, perhaps a solution is to “do nothing”. Just hold. And defer selling longer than what you would have planned upon. If you don’t sell you don’t pay CGT. Now I know this won’t work for everyone - particularly those in negatively geared properties who can’t absorb the cashflow hit - but it’s perhaps worth considering before advisers start telling us to churn our assets (generating fees for themselves) to somehow “escape” the new CGT regime.

Thoughts?