Decision by the Numbers, Issue 2
Your accountant has done the hard part. The small business CGT concessions have been claimed and the settlement money has landed with no CGT to pay. The next question gets far less attention: where does the money go now, and in whose name?
This issue runs that question on the numbers for one couple. The same investments sit in every option. Only where they are held changes, and that alone is worth about $550,000 after ten years and $1.85 million after twenty.
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The decision
Greg is 62 and Sarah is 60. They owned a distribution business equally for 18 years, sold it in August 2026 and retired. They qualified for the small business 15-year exemption, so they received $3 million, $1.5 million each, with no CGT to pay. Greg has $900,000 in super and Sarah has $400,000. Neither has any other income.
The common answer
Greg has the bigger super balance, so their first thought is to put as much as they can into his super and keep the rest in Sarah’s name. Their second thought is to keep the money out of super altogether, because Division 296 is here and the rules keep changing.
Both treat super as one account. It is two. Greg and Sarah each have their own $2.1 million limit on what can move into pension phase, where investment earnings are tax free.
The four options
| Option | What happens | Behind the best, 10 years | Behind the best, 20 years |
|---|---|---|---|
| 1. Fill both pensions | Greg and Sarah each move $2.1 million into pension phase. A small amount stays in Greg’s name | Best of the four | Best of the four |
| 2. Greg’s super first | Greg fills his pension allowance, and the rest stays in accumulation. Most of Sarah’s share stays in her own name | About $270,000 | About $810,000 |
| 3. Pensions plus a bond | As option 1, but the money outside super goes into an investment bond | About $270,000 | About $1,050,000 |
| 4. Keep it outside super | $1.5 million each in their own names | About $550,000 | About $1,850,000 |
Figures rounded. Same investments in every option. Pension payments are reinvested rather than spent, so this compares where the money grows, not a spending plan. Results allow for tax on gains not yet sold. How the numbers were worked out is set out at the end of this article.
Sarah’s empty pension space
This is the centre of the story. Sarah has never started a pension, so her whole $2.1 million limit is unused. Her own $400,000 can move across, and it takes another $1.7 million to fill the rest. Her $1.5 million share of the sale gets most of the way, and $200,000 from Greg’s share fills the gap, using her ordinary contribution allowance.
If most of the money goes into Greg’s super instead, he fills his pension allowance and the rest stays in accumulation, where earnings are taxed at 15 per cent. Sarah’s pension space stays mostly empty, and her share sits in her own name, where its earnings are taxed. Filling both pensions puts the same investments where the earnings are tax free. That is worth about $270,000 after ten years and $810,000 after twenty.
Why the other options fall behind
Keeping it outside super. For a couple with no other income, franking credits cover most of the tax in the early years. As the money grows, so does the tax. In pension phase the same franking credits come back as cash.
Division 296. It is law, but at these balances it costs little: about $46,000 over twenty years in the Greg-first option and nothing in the others. Keeping money out of super to avoid it costs far more.
The investment bond. A bond pays tax at up to 30 per cent inside the bond. Greg and Sarah pay less than that in their own names, so for them the bond costs more. It suits people on higher tax rates, and it has estate advantages this comparison does not count.
A family trust was left out. For a retired couple with nobody else to share income with, its tax result is close to holding the money in their own names, though a trust can offer other flexibility.
Decide before settlement
Getting sale money into super uses special contribution rules with strict time limits, and some of the paperwork has to reach the fund with the money. Whether each of you can use them depends on your own balances and history, and needs checking before settlement. Once the window closes, the option usually closes with it.
Three questions to answer before settlement
- Have we worked out how much of the sale money each of us can put into super, and whose name it should go into?
- Do we know what happens to the money that has to come out of super each year, or that sits above the limits?
- If one of us dies, who gets our super, and how much tax will our children pay on it?
Who does what after a sale
- Your accountant: which concession applies, the payments out of the business and the contribution paperwork.
- Your lawyer: the trust deed, wills and who receives your super if you die.
- A financial adviser: where the money goes, whose name it goes into, and what happens to the money that comes out of super each year.
To talk through your own sale, request a consultation.
Frequently asked questions
After selling a business, can both spouses put sale proceeds into super?
Often, yes. Each spouse has their own $2.1 million limit on what can move into pension phase, and sale proceeds that qualify for the small business concessions can be contributed under special rules. Whether each person can use them depends on their own balances and history, and needs checking before settlement.
Is it better to put business sale proceeds into the spouse with the bigger super balance?
Not necessarily. In this example, putting Greg’s super first finishes about $270,000 behind filling both pensions after ten years, because the same investments end up where their earnings are taxed.
Does Division 296 mean sale proceeds should stay out of super?
Not in this example. Division 296 costs about $46,000 over twenty years in the Greg-first option and nothing in the others, while keeping the money outside super finishes about $550,000 behind after ten years.
Is an investment bond a good place for business sale proceeds?
It depends on your tax rate. A bond pays tax at up to 30 per cent inside the bond, so it suits people on higher tax rates. For a retired couple with no other income, their own names were the cheaper place for money outside super.
How the numbers were worked out
How each option is funded:
- Option 1, fill both pensions: Greg contributes $1.2 million of his $1.5 million share. Sarah contributes her $1.5 million share plus $200,000 from Greg, using her ordinary contribution allowance. Both pensions start at $2.1 million and Greg keeps $100,000 in his own name.
- Option 2, Greg’s super first: Greg contributes his $1.5 million share plus $390,000 of Sarah’s share, using his ordinary contribution allowance. Sarah keeps $1.11 million in her own name.
- Option 3, pensions plus a bond: the same super as option 1. The $100,000 Greg keeps and the pension payments they do not spend go into an investment bond instead of their own names.
- Option 4, keep it outside super: $1.5 million each in their own names. Their existing super moves into pension phase.
The extra contributions in options 1 and 2 depend on each person’s super balance at the previous 30 June and on unused contribution allowances. They are available to Greg and Sarah on these figures, but eligibility needs checking for any real sale.
Assumptions:
- The same investments in every option: 6.5 per cent a year before franking credits, made up of 3.5 per cent income (a little over half of it fully franked) and 3 per cent growth, with a tenth of holdings sold and replaced each year.
- Current personal tax rates, including the lowest rate falling to 14 per cent from 1 July 2027. From 1 July 2027 gains made by individuals are indexed for inflation with a 30 per cent minimum tax; gains made before that date keep the 50 per cent discount.
- Super: no tax on earnings in pension phase, 15 per cent in accumulation. Pension payments are tax free at their ages.
- Division 296 on realised earnings, using the legislated balance measurement, with the $3 million threshold indexed in $150,000 steps.
- Minimum pension payments are drawn every year and reinvested in the name of whoever drew them. None is spent.
- The investment bond pays 30 per cent on its earnings and cannot receive a refund of excess franking credits. Yearly additions stay within the 125 per cent rule.
- Results are household wealth after a tax provision on gains not yet sold: 30 per cent outside super and in the bond, 10 per cent in accumulation.
Next issue
The key person 90-day gap. When a business partner is out for three months, who pays the wages?
Related pages: Business Owners and SME Operators · Business Protection and Succession · Retirement Planning · Decision by the Numbers Issue 1: Division 296 is law. Should money leave super before 30 June 2027?
General advice only. This article does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and read the relevant Product Disclosure Statement before acting. Sangram Rana is an Authorised Representative (No. 1251526) of Lifespan Financial Planning Pty Ltd (AFSL 229892). Build MyWealth (Accounting Cloud Pty Ltd) is a Corporate Authorised Representative (No. 1306106). Greg and Sarah are fictional. The figures are modelled and are not a client outcome.
