Ask Paul: Should I sell my shares to top up my super?
Worried about CGT changes and retirement? Paul explains whether investors with shares and ETFs should consider boosting their super instead.
Reader question
Hello Paul, what do changes to the capital gains tax (CGT) discount mean for ASX share portfolios outside of super?
I have shares that I purchased 30 years ago, set to a dividend reinvestment plan (DRP). The others I purchased within the past two years directly. I also invested in some ETFs.
The plan was to dollar-cost average every month, then sell down when needed in retirement in 10-15 years.
Am I better off redirecting this money into super instead? I'm in the 37% tax bracket.
Paul's response
I can only give you general information, Fran, but nothing changes for you until July 1, 2027. On that date, you will need to establish the value of your shares and ETFs, then future gains above inflation become taxable under the new rules.
More broadly, unless you are a very organised person, I find dividend reinvestment, while it makes technical sense, a real pain when it comes to CGT before or after July 1, 2027.
Either way, each reinvestment is a new CGT issue and it drives me nuts trying to record each reinvestment under the rules before the effective date, let alone doing inflation-adjusted calculations on each reinvestment after the date.
I do appreciate that tax will keep changing, but the two most favoured assets would have to be our home and our super.
Sure, super is being taxed more at higher amounts, but for the vast majority of people, paying no tax on your super earnings on amounts up to $2 million, if you are in pension phase, is super generous (pun intended).
If you are in accumulation phase, it is 15% tax on income and 10% on capital gains inside your fund.
You could add money through salary sacrifice and only pay 15% tax on these contributions.
I'd chat to your fund, Fran, but without knowing your personal objectives or exact timeframe, if I was in your shoes and building money for retirement, growing my super would be my number one preference.
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