Death Benefit Tax Planning

Carrying on from my morbid obsession of last week, I again discuss the consequences of death in this week's blog.  Knowing your impending demise can actually save tax for your beneficiaries when they are paid a superannuation death benefit.  When a non-dependent receives a superannuation death benefit as a lump sum, the benefit can be taxed at 17% if paid from a taxed source.  A non-dependent for taxation purposes is usually a child over the age of 18 that is no longer dependent on his/her parents.

An example can highlight what is meant by all of this;

Bill is 63 years old with a superannuation balance all from a taxed source of $1,000,000.  He has one child, John who is 37 years old and stands to receive Bill's superannuation benefit in the event of his demise.  Bill is hit by a bus on his way home from the pub and the superannuation fund trustee pays out the death benefit to John after deducting the required 17% tax, leaving John with a net amount of $830,000.

Consider similar facts above but this time Bill is unfortunately diagnosed with cancer and is given 12 months to live.  As Bill is over 60 and assuming he is retired, he can access his whole superannuation balance tax free.  He doesn't need the superannuation money, withdraws the full balance and gives it John.  John now receives the full $1,000,000 instead of the $830,000 he would receive in the first scenario.

Llama Blue

Llamablue specialises in Squarespace and provides web design, web hosting, online stores and SEO strategies for businesses in and around Australia, USA, UK, Europe and internationally. Llamablue hosts customer websites in Australia - Adelaide, Melbourne, Sydney, Canberra, Brisbane, Sunshine Coast, Gold Coast and now in the USA. We are expanding rapidly and can help you wherever you are based. So let's talk.