Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: [email protected]

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We’ve previously discussed the death tax on superannuation. To put it simply, when someone passes away, the taxable component of their superannuation faces a 15% tax, plus the 2% Medicare levy, if it is left to a non-dependent for superannuation purposes, such as an adult child. That means $85,000 tax payable on a $500,000 balance if the entire balance is taxable, which is probable.

Time can be crucial here. I recently got an email from a woman whose parents died last year. Her father passed away first; he had a binding nomination for his wife to receive the balance, which would have avoided the death tax, as a spouse is a dependent for superannuation purposes. However, the super rules forbid a fund from paying benefits to someone who is deceased, so because she passed away just three days later, the super fund refused to pay the money to her estate.

When is the right time to withdraw your super? Image Credit: Shutterstock

It’s unusual for spouses to die just three days apart, but super funds can take months to process death benefit payments. If the surviving spouse passes away before the benefit is paid, the estate will be left to pay the death tax.

So, how do you avoid this tax? The simple solution is to ensure your attorney withdraws your super tax-free before you die. Let’s be realistic – most people don’t pass away suddenly, and there are often signs that death may be approaching. But it’s not easy – people who hope or believe they have many years left can be reluctant to withdraw their super.

This begs the question: when should you exit/withdraw your super?

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[IAN3005]

I got out of super quicker than a flash of lightning... the biggest rort ever....7% return is ridiculous when you think about what you can do with money and earn a greater return.

 

[Luckyus]

The simple solution is to ensure your attorney withdraws your super tax-free before you die. And hope the bastards honest?

 

[nanakaye]

My brother passed away in February and he named me as receiving the Binding Death Benefit on his Super.
He had no spouse or children and because I was not his dependent the Super Fund wont let me have the money. They will only pay into his Estate which I am still waiting on.

 

[IAN3005]

I am glad I got of mine when I did. It is the biggest rort ever.

 

[tekkac]

They even rip you off when you die, even funerals and burials incur GST

 

[Jumping Jack Flash]

Time to rethink our Superannuation, my friends! ......

 

[Aunty Rolls]

I think it is dreadful. Just another way to grab money off the people. It makes one wonder why they bother to save at all. None of our children are wealthy, they are battlers as we were. If we have something left to bequeath to them, it might make it a little easier for them to survive. What is wrong with that idea? Surely the better off most of us are, the less we will be asking for in terms of government handouts. As self funded retirees, who have always been thrifty, we do not take all we are offered, because at present we don’t need to. At 86 and 82, we still fend for ourselves, so don’t allow government to put a death tax in place.

 

[MariaG]

In my day, there was something called death duty.
One of a myriad of stupid taxes that have emerged over the years. Here we go again.
As far as Super goes, we are well beyond that, and, did not rely on it when hubby became disabled, then I left work to care for him. The only superannuation available then was the one I set up myself with a local company. Was not enough left in that to make me a woman of leisure
So, looks like it's time for the voices of Oz voters be raised in objection.

 

[Sean2325]

Great article and very educational. I had no idea that was the law on Super. Disappointed to be honest, unfortunately not surprised. a rethink is in order after reading this article.

 

[IAN3005]

Time to rethink our Superannuation, my friends! ......

Get out of i.. I did when the admitting fee was greater than the return on the super.

Great article and very educational. I had no idea that was the law on Super. Disappointed to be honest, unfortunately not surprised. a rethink is in order after reading this article.

Get out as soon as you can.....