Death tax on superannuation balance
Members usually look to the bottom line of their annual statements to check the growth or improvement, hopefully, in the balance of their benefits since the last report. Members should also note the tax make up of the balance and consider the estate planning aspects in the event of any untimely death.
Tax components – Tax Free and Taxable
The tax free portion of your super benefits is usually from non-concessional or non-deducted contributions and generally this total is not substantial. The taxable portion is from employer and other concessional or deducted contributions and generally is the significant tax component.
Upon the death of a member, the deceased member’s superannuation entitlement generally may only be paid to the member’s dependants, or the member’s legal personal representative such as an executor. There are no tax consequences where the entitlement is paid to a spouse or children under 18 years of age (24 years if financially dependant). However, where the entitlement is paid to adult non-dependant children, and this is not uncommon, the taxable portion is taxed at 17% including medicare, and therefore can be a significant amount!
A little estate planning in advance would be invaluable in optimising the tax components.
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