Pre-retirees can avoid a hefty tax bill

PAINFUL as it is, this year's share market plunge might deliver some handy financial benefits to pre-retirees.

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Pre-retirees can avoid a hefty tax bill

PAINFUL as it is, this year's share market plunge might deliver some handy financial benefits to pre-retirees.

William Buck director of financial services Chris Kennedy says now is a great time for people who are nearing retirement to consider transferring assets to superannuation, because low market values can potentially save them a hefty capital gains tax bill.

Mr Kennedy said super was generally the best vehicle for retirement savings because of its low-tax or no-tax status, but the CGT payable on transferring assets to super could make it unappealing.

"Tax is always an important part of total returns in a portfolio, but people don't really pay attention to that side of things,'' he said.

"Because the share market is down, if you have assets in your name or in a family trust that you are planning to use for retirement, now is a good time to consider putting them into a super fund because the CGT on transferring those investments will either be very low or, if the asset has made a loss, there will be no CGT.''

For example, someone who had had $100,000 of BHP shares earlier this year and was sitting on a $50,000 capital gain is now likely to have no gain because the share price has more than halved, meaning there is no tax bill for transferring the shares to their super.

For individuals, the capital gain on an asset held for less than one year is added to their taxable income and taxed at their marginal tax rate. If the asset is held for more than a year, only half of the gain is added to income.