Super Inheritances and Death Tax

Are you expecting an inheritance at some stage in the next few years?

If so, do yourself a favour.

Sit your parents down.

Look them in the eye and ask them "Do you know how much tax will be taken from your super when you die?"

It’s confronting and they won’t know of course, but that’s the point.

A client came to me after her mother had died. She thought she would receive about $1m from mum’s super. But over $100,000 was taken in tax.

Components of super

Your super balance is made up of various components (it’s a tax thing).

Much of your super (the ‘taxable’ component) has already been taxed at a minimum of 15% as it goes into your account (think employer and personal concessional contributions, salary sacrifice).

When you die and your super passes to an adult child the government basically says, “Look, this adult child is out and about in the world earning money, you have only paid 15% on it so far, so we’re going to take a bit more tax from the taxable component. But hey, you’re children are still getting something for nothing, so they should be ok with it!”

Most people aren’t ok with with it.

Solutions

The good news is that there are ways to eliminate or at least reduce the tax paid. But it needs careful planning and may take a few years.

And it can have added benefits depending on you and your partner’s age and incomes. There may be opportunities to reduce income tax as well.

It’s something I look at with all of my pre-retiree clients so it never becomes a problem down the track.

Next steps

It is such a shame that people aren't aware of these things.

The best thing to do is to plan early. This isn’t an ‘old age’ thing. It’s best done in the pre-retirement phase, especially if one partner is still working and one isn’t as there can be other tax benefits in the process.

Book a free call and see what your options are.

The information contained in this blog has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.