FMJ
You forgot one of the Super taxes, the big one, the 15% withdrawal tax that Costello removed in 2007 while he still could do it thank goodness.
It was/is bad enough to have to pay a small $35 charge on every withdrawal for my Superfund when I retire, so it'll be one big withdrawal I hope, but the idea of having to pay any useless gov't another 15% after I've paid income tax on some of my original contrib's and 15% contrib' tax on the rest going in [so only 85% left going in] then paying 15% tax on earnings in the Fund in accumulation phase but to back then have to pay withdrawal tax at 15% on all withdr's totalling above a low threshold [about $150,000?] was punishing and stupid.
FMJ You also missed another 15% Super tax [plus Medicare levy] and sometimes up to 30% [plus medicare levy], the dastardly Death Tax, that still exists for those of us that die suddenly or don't live long enough in retirement to spend it all or those who are silly enough as to leave it in Super well into their old age rather than spending or gifting some or investing most of it themselves.
Estate planning: Beware the dastardly death tax
Trish Power - October 9, 2015
6 Comments
Although superannuation
death benefits are tax-free when paid to individuals considered ‘dependants under the tax laws’, a ‘death tax’ continues to apply when super monies are paid to individuals considered ‘
non-dependants under the tax laws’.
Any of your children aged 18 or over, who can’t prove they were dependent on you financially before you died, or can’t prove they had an interdependent relationship with you before you died, are deemed NOT to be a ‘dependant under the tax laws’, even though they are a ‘dependant under the super laws’. What this means is that they can still receive a death benefit from your super fund or estate, but the death benefit is likely to be taxed, depending on the components of the super benefit.
Dependant definition: A ‘dependant under the tax rules’ (which means tax-free superannuation death benefits) automatically includes a fund member’s spouse (including same sex spouse since 1 July 2008) and the fund member’s children who are aged under 18. An adult child, or anyone else for that matter, can be deemed to be a dependant under the tax rules if he or she can prove:
- he or she was financially dependent on the deceased fund member, or
- he or she had an ‘interdependent relationship’ with the deceased. An interdependent relationship is a close personal relationship between two people who live together, where one or both provides for the financial and domestic support, and care of the other.
Note: A financially independent adult child is considered a dependant under the super laws, but treated as a non-dependant under the tax laws. What this means is that your child can receive superannuation death benefits, but is likely to pay tax on those super benefits. Non-dependants under both the superannuation laws and tax laws can also receive a superannuation death benefit, but usually only after a super fund pays a benefit to a person’s estate.
How much death tax is payable?
The level of tax payable on lump sums paid to ‘non-dependants under the tax laws’ depends on the components that make up the death benefit. A death benefit can be made up of:
- a taxable component and
- a tax-free component, or
- just one of these components.
In taxed schemes (90% of fund members belong to such schemes), the deceased’s tax-free component is always tax-free, but the taxable component will be subject to 15% tax plus Medicare levy when paid to a non-dependant under the tax laws.
In untaxed schemes (many long-term public sector fund members), the deceased’s tax-free component is always tax-free, but 30% tax (plus Medicare levy) will be payable on the death benefit with an untaxed element taxable component.
Note: Lump sum benefits paid to ‘dependants under the superannuation laws’ are tax-free when paid from taxed schemes or untaxed schemes. Lump sum benefits paid to non-dependants via the deceased’s estate are subject to the ‘death tax’ but are NOT subject to the Medicare levy.
