I tried to understand the rules for putting a lump sum from the sale of an investment property into a superannuation and claiming a tax deduction, thereby reducing or eliminating capital gains tax (CGT). It’s incredibly complex. I’m retired. No suggestions?

Let’s go step by step.

When you realize a taxable capital gain, the amount of this capital gain, minus a 50% discount if you have owned the property for more than a year, is added to your taxable income for the year of the signing of the sales agreement.

Credit:Simon Letch

It will then be taxed at your marginal tax rate, which may be higher than if all or part of that gain moved you into a higher tax bracket.

Suppose a person earns $35,000 per year and realizes a taxable capital gain of $30,000 after the reduction. $10,000 of that amount would again be taxed at 19%, bringing them to the next tax threshold of $45,000. In this case, the remaining $20,000 would be taxed at 32.5%. The tax treatment would be the same if you received a salary bonus of $30,000.

However, you can reduce the CGT if you can reduce the amount of your taxable income in the year you realized the gain.

In this case, if you made a super tax-deductible concessional contribution of $27,500, the entire capital gain on the property would be kept below $37,500, which would significantly reduce the additional tax that would normally be paid.

Remember that super deductible contributions lose a 15% contribution tax. Also, if you’re retired and between the ages of 67 and 75, you’ll need to pass the work test – worked at least 40 hours in a maximum of 30 days – before making the super contribution this exercise.

After a lifetime of self-employment, I plan to retire at the end of the fiscal year, just before I turn 70. I have $1.1 million in my super account and want to start a pension fund. In 2017, when I had a self-directed super fund, I adopted a withdrawal and re-contribution strategy to dilute the taxable component of my super, for the long-term benefit of my children, who will inherit any super balance – my only asset – when I die. Would you recommend that I withdraw $330,000 now, then return it as an after-tax contribution before converting my super into pension mode?