Money

The Death Tax

Noel Whittaker
Noel Whittaker

RECENTLY I've received a number of emails asking about the death tax of 16.5 per cent on the taxable portion of a superannuation payout that is left to a non-dependant.  In this context, a spouse is always a dependant, whether they are working or not.

One way to lessen the death tax is to reduce the taxable portion of your super.  This is usually done by withdrawing funds once you reach 60 when withdrawals become tax free, and then re-contributing them as non-concessional contributions.  Advice should be taken as there are heavy penalties for exceeding the caps, and it is not possible to do this once you reach 65 unless you can pass the work test.

Recently I recommended to a reader that they simply withdrew their superannuation tax free prior to death as this would avoid any death tax that would be payable on it but they wondered how this could be done in view of the fact that few people know the date they are going to die.

It's important to understand that the main purpose of superannuation is to save tax.  Therefore, if you are thinking about moving your superannuation to cash you should ask your accountant or adviser to calculate what your tax position would be before and after the transaction was completed.  If the amount in superannuation was relatively small you may well find that there is no benefit in retaining the money in super.

Once the money leaves super it becomes part of your estate and can be bequeathed to whom you choose in terms of your will.  If you believe there may be arguments between the beneficiaries you could always invest the money in insurance bonds - they cannot be challenged under the will.

Noel Whittaker is a co-founder of Whittaker Macnaught Pty Ltd.  His advice is general in nature and readers should seek their own professional advice before making any financial decisions.  His email is noelwhit@gmail.com

Topics:  noel whittaker, superannuation, tax




Join the Community.

Get your local news, your way.

Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Armed robbery in South Grafton

The Coles Express Service Station on Bent St in South Grafton was held up by an armed robbery on Thursday night, 5th of May, 2016.Photo Bill North / Daily Examiner

18-year-old to face court charged with armed robbery

OUR SAY: Don’t give your vote away cheaply

Acting Prime Minister Barnaby Joyce and Member for Page Kevin Hogan at an announcement naming the Northern Rivers as the home of Co-operatives National Centre of Excellence.

As residents of Page, we can expect plenty of attention

WOW DAY: Wear orange this Wednesday to support SES

WEAR Orange Wednesday to cooincide with National Volunteer Week

Latest deals and offers

NSW Police join Dance Challenge

NSW Police show their moves at Manly Wharf.

Manly Wharf is the backdrop to NSW Police running-man dance entry.

Scotland Police accept Dance Challenge

NZ Police doing the running man dance.

Australian Federal Police say watch this space but NT Police feel ignored.

Gwen Stefani, George Clooney and Julia Roberts sing Queen

Gwen Stefani, George Clooney and Julia Roberts.

James Corden from The Late Late Show sings Carpool Karaoke with Gwen Stefani and...

How a sacked real estate agent made $725k in four months

Agent is now under investigation by the industry watchdog

VIDEO: Art Deco fan pays $835,000 for Imperial Hotel

No Caption

Iconic "Impy" sold at a bargan price to bidder who loves Art Deco.

RBA warns of future apartment oversupply

Toowoomba: Crest Apartments and Burke & Wills, Ruthven Street ( view from Neil Street) Photo Bev Lacey / The Chronicle

RBA says oversupply of apartments poses risk to household finances