AAP

Take advice before it is too late

IN turbulent times it is easy to become focused on the gyrations of the market and overlook the importance of getting appropriate advice when making major decisions.

A recent email from a reader is a classic example. He signed a contract to sell property in April and settlement of it was due in June. As he was over 50 he and his wife were each eligible to contribute $100,000 to super as a tax deduction at that time and he had arranged for this to happen prior to June 30.

Unfortunately the property did not settle until after June 30. He had held off making the superannuation contributions for two reasons - insufficient funds, and a belief that the postponement of the settlement date to July 2009 meant that capital gains tax would not be payable until the current financial year.

Only a week ago he found to his horror that it is the date of the contract, not the settlement date, that is the appropriate date for capital gains tax purposes. Even though his property did not settle until after June, capital gains tax is still payable in the financial year ended June 2009. This error of judgement meant that he was unable to claim a tax deduction for superannuation contributions to offset the capital gain, and is now liable for a large amount of unnecessary tax.

I pointed out to him that he could have taken out a short-term loan to make superannuation contributions prior to June 30 - the interest would not have been tax deductible but he still could have enjoyed a tax deduction for the contribution itself.

This is just one of many stories that continually cross my desk. Just remember it is important to take advice before the event - it can be impossible to change strategies once the deed is done.

Noel Whittaker is a director of Whittaker Macnaught, a division of St Andrew's Australia. This advice is general in nature and readers should seek their own expert advice before making financial decisions. His email is noelwhit@gmail.com



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