One of the most significant tax burdens in Australia can arise when superannuation death benefits are paid to an adult child.
These benefits can be taxed at up to 17% on the capital, and the amount is also included in the recipient’s taxable income.
This can affect eligibility for a range of means-tested benefits, such as child support assessments, childcare subsidies, private health insurance rebates, and even trigger the additional 15% tax on super contributions.
The combined effect can add thousands of dollars to the overall tax bill on a parent’s superannuation.
Many older Australians were advised to keep their money in super for as long as possible – advice that made sense when the 15% tax on death benefits could be offset. However, this option was removed in 2017.
Now, retaining funds in their super until death may lead to significant tax liabilities. In contrast, some individuals could withdraw their super early, pay little or no tax, and potentially save their children tens of thousands in unnecessary taxes.
If your parents have money in a super fund, it’s worth having a conversation with us.
We can potentially help model the tax implications of keeping funds in super versus withdrawing earlier, helping your family make informed choices and potentially avoid a costly tax bill.
We’re here to help.
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Find out how we can help by booking in your tax planning session with us before the end of the financial year.
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