by Stacy Barnes 2018
"In Australia, death duties (broadly inheritance taxes) were abolished in 1979. In the realm of superannuation, however, when a member dies, recipients of superannuation death benefits are sometimes liable to pay tax".
Who doesn’t have to pay the super death tax?
your spouse (including de facto) or former spouse;
your child aged under 18 years old;
any person who you have an interdependency relationship just before you died; and
any person who was financially dependent on you just before you died.
How much is the death tax?
The recipient of the taxable component will usually pay at most 15% tax plus levies on that component, unless special situations apply to lift the rate to 30% plus levies. However, if the recipient has low to nil taxable income in that financial year, their tax free threshold may apply.
Critical thinking & how to seek refuge
The ‘super death tax’ only applies when a person dies with money in superannuation. Those who have met a full condition of release and withdraw super prior to dying but after reaching age 60, will be able to take those withdrawals into their hands tax free... Then pass on...
Accordingly, while there is no headline ‘death tax’ as such, the death of a super fund member can often give rise to tax and duty. Naturally, appropriate advance planning and ensuring a well-documented succession plan is in place can minimise any death tax, well worth the time to look, anyway to reduce the ATO's tax grab is!
We have been doing a few what I call 'Life Benefit splits' of late, this may be of interest to you should you be in the position you are interested in calculating how much you need for your endeavours and what you can do without... See Blog 'Life benefits'