While it is a great outcome to keep as much of your money in your super as is possible, you do need to be conscious that at some point, the remaining balance may be passed onto the next generation, potentially as a part of their inheritance, with a tax liability.

When this money does change hands and is given to the next generation, if the superannuation balance includes a taxable component, then your children may be subject to as much as 17% tax on the capital value of that balance.

Different tax treatments can apply depending on whether your super is being paid as a lump sum, income stream or mixture of both, and if your beneficiary or beneficiaries are classified as ‘tax dependents’.

A tax dependent includes:

• a current spouse, including defactos
• any children of the deceased who are under the age of 18
• any other financial dependents.

If your beneficiaries were not financially dependent of you, such as a spouse or child under 18 years of age, then they will have to pay tax on the inheritance that you have left for them in your superannuation fund.

However, if you take that money out of your super and it passes to your children as a part of your estate instead, there will be no death duties payable (in this instance, ‘death duties’ refers to inheritance tax that may be payable, which has not been an issue since 1981).

Consulting with a professional is the best way to ensure that your income in retirement is currently or will be operating at its most effective level, and they can assist you with understanding what you may need to do to get your affairs in preparation for the future.

We’re ready to help. Understand your position, call our team +61 3 9820 6400.

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