An $1080 share investment I made in 1993 is now worth $204,000. Should I sell?
I have about 1300 Commbank shares. l started off with 200 in 1993 and have just kept going with the dividend reinvestment plan. With the tax changes coming in July 2027, should l be selling them before that date? I am 65, my wife is 66,and we plan to retire at about that time. We have no debt and a reasonable sum in each of our super funds.
The most important ingredient to investment and wealth creation success is patience, something most of us struggle with. So firstly, a big “well done” for sitting on these shares for more than 30 years. That $1080 investment you made back in 1993 is now worth $204,000, a fantastic outcome, and a great illustration of the wisdom of investing into productive businesses via shares.
There are several reasons why you might choose to sell these shares – to boost your super on retirement, to help a family member, to buy a caravan and hit the road, and I’m sure there is plenty more. But selling them because of the tax changes coming in 2027 is not one of them.
From July next year the way capital gains tax is calculated will change. But that change only affects the period from 1 July 2027 onwards. It has no impact on your tax treatment up to that point. This change is therefore in no way a catalyst to induce a sale that you otherwise would not have made.
As an aside, it is also worth mentioning that the new calculation method is likely (depends on future inflation rates) to be better than the old calculation method for investments held for a really long time – for example, shares held for 30-plus years.
I have recently turned 60, am single with no children, and own my home. I work about 24 hours a week and hope to continue working until age 65. I have $200,000 in a term deposit that matures next May. I’ve been making additional concessional super contributions to reduce the amount of my income taxed at 30 per cent. Now that I’m 60, are there other strategies to consider in the lead-up to retirement? For example, could a transition-to-retirement pension be worthwhile, or would I be better off focusing on making additional contributions to super?
Starting a transition-to-retirement pension only typically makes sense if you need extra income. These days the pool of money supporting the pension does not become tax-free, which was a key benefit in the past.
The value in making tax-deductible super contributions depends on your level of income, total super balance, and position with regard to transfer balance cap. There’s no meaningful benefit to be gained in getting your taxable income below $45,000, as under this level you are paying at most 15 per cent tax, the same as the contribution tax that will apply when your super contribution reaches your fund.
You should determine how much income you require to be comfortable in retirement, and then have your financial planner run some modelling to check that your current savings and intended contributions in the years ahead will enable you to draw this income without risk of running out of savings in your lifetime. The modelling could then inform whether further superannuation contributions (potentially from the term deposit) are advisable, as well as the point at which full retirement would be an option for you.
Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: paul@financialautonomy.com.au
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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