Saving tax for your beneficiaries after you go to a higher place


Did you know that when you bequest superannuation benefits to non-dependants, they can pay tax between 15% – 17%?

Adult children can pay tax on the taxable component of your superannuation death benefits which may erode their final inheritance, if the bulk of your wealth is held within the vehicle of superannuation.

Taxable components consist of those contributions made during your lifetime which have had the 15% tax deducted. I.e.: Employer contributions, salary sacrificed contributions and personal contributions, for which you have claimed a tax deduction.

So, a double tax whammy going in and out of superannuation!

This however can be reduced or eliminated with the use of a recontribution strategy.

Those with funds within the pension phase over Age 60, could make a lump sum withdrawal of their benefits completely tax free, commute these funds back to the accumulation phase then recontribute back as after tax or non-concessional contributions, which means the funds are going in tax free and can therefore be withdrawn tax free to beneficiaries, when you go to a higher place.

The recontribution of funds however needs to be within the relevant non concessional or after-tax contributions cap.

The removal of the work test for non-concessional or after tax contributions will also open the door to this strategy for those aged 67-74 from 1 July 2022, who would previously not qualify.