new strategy?, page-12

hlingh,

If you die and the super fund death benefit is simply added to your estate (rather than say passed to your partner), then when the estate is distributed then some tax may be payable.

My rationale for the payment of tax in this circumstance is that during accumulation of super assets you have been paying tax at a lower rate (to encourage you to save).

If instead of spending the super funds on your own retirement you give it away to others then you will be going against the rationale of giving you a tax discount. So it is only fair that the tax that you would have paid, if you had not have been saving through superannuation, be paid when the super fund is wound up.

If you are worried about your children paying tax then simply withdraw all funds from the super fund before you pass on - there is no tax on funds, outside of super, distributed by the executor of the will.

It gets complicated with regard to how come some super assets may be taxable, and to what level. Superannuation rules have changed over the many years, with different rules resulting different tax liabilities.

When you withdraw funds (in penson mode) you may "use up" some of the "taxable component" funds. This removes the liability for future payment of tax (because it is no longer in the fund). You can then re-contribute this back to the super fund. This will end up as a "tax-free component" (as long as you don't claim a tax deduction for it). You must have a substantial amount defined as "taxable component" for a re-contribution scheme to be worthwhile.

Hope this helps. Of course, I am not an advisor on tax, or superannuation, for that matter. Thanks for asking the question, though, because I have just noticed that the tax/taxable component calculations for my fund were incorrect for last financial year - and not noticed by the auditor!