Lighthouse Financial Advisers Townsville | Helping people over 50 retire with confidence
  • Home
  • What We Do
  • Who We Are
  • Podcast
  • Blog
  • FAQ
  • Contact Us

How to avoid a 17% inheritance tax

1/6/2020

 
Older couple sitting on bench at the beach
​A big part of a financial planner's role is to minimise the tax you pay as much as possible, this even includes the tax your loved ones will on the assets you leave behind when you pass away.
Who your superannuation or pension account benefits go to when you pass away will determine how these assets are treated tax-wise.

For example, if the money were to go to your spouse or young children, who are considered to be your dependent beneficiaries, they would pay no tax on the whole amount.

On the other hand, if the money were to go to a non-dependent beneficiary, such as adult children who fund their own life, they will pay no tax on the tax-free component but will have 17% tax payable on the taxable* portion of the benefit.
*The taxable component may include a taxed and/or untaxed element depending on the situation. But we will focus on the taxed element only.

There are 2 main strategies used to minimise the tax payable of a non-dependent death benefit recipient.

  • Withdraw entire balance.
    • If you are aware that you will pass away very soon, you could withdraw your entire superannuation/pension balance and leave it as cash in a bank account to pass onto your chosen recipient.
 
  • Recontribution strategy.
    • This is where you would withdraw from your superannuation account and recontribute it back in from age 60 up until retirement.
    • For example, In the last 5 years of your working life, from 60 to age 65, you take $100,000 out of superannuation and recontribute it back in as an after-tax contribution. By doing this, the components of your superannuation change, increasing the tax-free component by $500,000 and decreasing the taxable component by $500,000 over this 5 year period. That is an $85,000 (17% of $500,000) instant tax-saving for your non-dependant beneficiary!
    • If you attempt to do this prior to age 60, you will most likely receive a tax payable surprise, so the timing is important.
    • If you are working past age 65 and meet the relevant work test, you can continue to use this strategy up to age 75.
    • The strategy does have conditions that need to be met and they do change along with legislation changes, therefore, the strategy will need to be looked at alongside a financial planner to see if it fits your situation. 

Death may be a topic you'd rather avoid, but I'm sure you'll be much happier knowing that you can save your loved ones thousands of dollars worth in tax.

Comments are closed.

    Author

    Dallas Davison, Michael Hogue and Ali Hogue.

    Archives

    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    April 2018
    March 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    June 2016
    May 2016
    April 2016
    January 2016
    November 2015
    July 2015
    June 2015

    Categories

    All
    Alice Springs
    Book Reviews
    Budget
    Charters Towers
    Cloncurry
    Contract
    Contributions
    Debt Reduction
    Economy
    Events
    Examples
    FAQ
    Fees
    Financial Adviser
    Financial Planning
    Fund Management
    Goal Setting
    History
    Hughenden
    Inflation
    Interesting
    Interest Rates
    Investment
    Julia Creek
    Lifestyle
    Media
    Money
    Money Over 50
    Mount Isa
    Pandemic
    Pension
    Priorities
    Retirement
    Richmond
    Risk
    Sharemarket
    Superannuation
    Tax
    Travel
    Uncertainty
    Wealth
    Winton

​HOME
WHAT WE DO
WHO WE ARE
PODCAST
BLOG
CONTACT US

Important Information
Financial Services Guide
Privacy Policy
Lighthouse Financial Advisers Townsville
​
Tel 07 4772 0938
Email mail@lighthouseadvisers.com.au
45 Ingham Road West End Townsville Qld 4810

Lighthouse Financial Advisers Townsville Pty Ltd ABN 26 146 225 505, 45 Ingham Road, West End Queensland 4810 is the holder of an ASIC Australian Financial Services Licence (AFSL) #471826.

Website by Grey and Grey
  • Home
  • What We Do
  • Who We Are
  • Podcast
  • Blog
  • FAQ
  • Contact Us