Tax dangers in property obsession

Martin Murden

Australian investors’ continuing love affair with property investment is now combining with superannuation changes to give rise to an increase in Capital Gains Tax (CGT) problems, according to self-managed superannuation funds administration specialist company Partners Superannuation Services.

Partners Superannuation director Martin Murden said investment in property by Australians when combined with a reluctance to sell property to avoid CGT at death had long been a problem for people looking to use their self-managed superannuation funds to invest in property.

He said the problem had intensified with the explosion in the number of people investing in superannuation and the level of property now held in superannuation funds.

“Investment in property is not the problem,” Murden said. “The problem is people’s reluctance to sell their property even when they begin receiving a pension.”

He said the properties causing the biggest CGT headaches were family farms and premises from which family businesses operated.

“The problem is that in many instances, the superannuant’s children are either operating the farm or running the family business and parents’ reluctance to sell stems from not wanting to impose an external landlord on their children,” Murden said.

He said that such people were overlooking the fact that when they died and the properties were sold, non-tax dependant beneficiaries would be liable for both the 16.5 per cent on the taxable component of their superannuation as well as CGT.

“For properties held for more than 12 months, this is effectively 10 per cent on the increase in value,” Murden said.