Death Duties and Super?

Death Duties and Super

Written by Anthony Picone

Steward Wealth Co-Founder, Anthony, comes from Australia's most successful investment bank. In addition to his expertise in investments, Anthony provides Strategic and specialist Superannuation advice to clients.
November 5, 2018

A recent article from Noel Whittaker titled ‘This is Australia’s version of a death tax’ prompted a few questions from some of our elderly clients.

It’s not really a ‘death tax’ as such, but it reminds people about how your superfund may actually pay tax upon your death.

We wrote a more comprehensive article on this very subject earlier in the year titled “What happens to my super when I die?” which you can access here.

To keep it simple, your super doesn’t incur tax on death if it’s passed onto a ‘dependent’, which is defined in this instance as a

  • spouse
  • child under the age of 18
  • any person over 18 years and financially dependent or in an interdependent relationship.

If the beneficiary doesn’t qualify as a ‘dependent’, a tax of up to 15% (plus the Medicare Levy) may apply to the ‘taxable’ component of your super balance. Your super generally consists of both a ‘taxable’ and a ‘tax free’ component, even if you’re in the pension phase.

There are strategies you can consider to reduce the ‘taxable’ component but given everyone’s situation is just that little bit different, it’s important you speak with your adviser, or alternatively call us, and we can work out the most appropriate and tax effective course of action.

Interesting enough, if you are over 65 years of age (or over 60 years and permanently retired from the workforce), you can simply make lump sum withdrawals from your super fund tax free. So, if you know your death is imminent, withdrawing your balance from super can be a way to avoid ‘Australia’s version of a death tax’. But be certain, because if it’s a false alarm, it may be that you can’t get your money back into the super environment, and you’re likely to be paying tax all over again.

As I previously mentioned, if you would like greater detail on superannuation death benefits, simply click here.

This information is of a general nature only and nothing on this site should be taken as personal financial or investment advice, or a recommendation to buy or sell a particular product. You should also obtain a copy of and consider the Product Disclosure Statement before making any decision on a financial product. You should seek advice from Steward Wealth who can consider if the general advice is right for you.

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