Updated: 03 December 2024
Did you know that your superannuation savings could be subject to a hefty tax when you die?
Most people don’t know it, but there are death taxes by stealth in Australia.
While it’s not an inheritance tax per se, if it looks like a duck and quacks like a duck …. Millions of Australians’ retirement savings are taxed upon their death, and yours could be too!
NEARLY ONE THIRD OF YOUR SUPER COULD BE TAKEN BY THE GOVERNMENT
It all depends on your marital status and whether you have “dependants” (that is children or someone else who lives with you and financially depends on you).
If you are single and childless, and no one else depends on you, your super money will be taxed before being handed to the person you nominate to receive it — assuming you nominated someone prior to your death to get the money.
If you’ve got retirement savings in your super fund when you die, that money will be taxed up to 32 per cent before the remaining portion is transferred to your nominated beneficiaries.
Conversely, married people, those in a de facto arrangement and those with dependent children don’t face the same tax consequence in the event of their death.
While lone-person households used to be an anomaly, they are becoming more common.
According to ABS data, over one quarter of Australian households are now made up of people living alone.
This figure is projected to increase over time.
According to the Australian Bureau of Statistics (ABS), there were 2.9 million lone-person households in private dwellings in Australia in June 2024. This is part of a larger estimate of 10.7 million households in total.
The ABS reports that 118,439 marriages were registered in Australia in 2023, which is a 6.9% decrease from the record high of 127,161 in 2022. The number of divorces granted in 2023 was 48,700, which is a 1.1% decrease.
Single-person households were the fastest-growing household type globally in 2010-2023, expanding to 31 per cent, with nearly half this growth in absolute numbers attributable to the Asia-Pacific region.
Divorce rates have also been surging globally and populations with a divorced marital status will be the fastest growing cohort.
Over the same period, the number of single-parent households will grow at three times the rate of couple-with-children households.
It is predicted almost all western countries will see a decline in number of children per household between 2030 and 2050.
As fewer couples have children, the report suggested, the number of childless-couple households will surge worldwide, far outpacing growth in couple-with-children households.
This all has an effect upon how your super will be treated for tax purposes when you die.
The superannuation scheme was created to help people in their retirement, and to ease the public burden on the age pension. Overall the scheme works pretty well – EXCEPT that it wasn’t designed as a wealth-transfer vehicle for you to pass along your assets to your loved-ones when you die.
So … if you or someone you know has a fair bit of super saved-up, and want to ensure that the Government doesn’t get too much of it when you die, maybe it’s time to put your affairs in order, and create a modern integrated estate plan before it’s too late?
Be cautious, and take advice before you decide.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
Click on this link if you have any questions or would like further information, or use the following link to book a timeslot for a free 15-minute phone consultation on my schedule: https://calendly.com/genders
We can help you to protect yourself and your family. We look forward to being of service.
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All these and many more estate planning and asset protection options are available for discussion with the oldest law firm in South Australia.
Genders and Partners will work with your Financial Advisor and/or Accountant to structure your estate planning as appropriate to your circumstances, including advice as to the use of testamentary trusts.
Disclaimer
The information contained in this document is intended as general information only and has been prepared without taking into account the needs, objectives or financial information of any particular person.
Prior to making any decision, you should assess whether the information is appropriate to your particular needs, objectives and financial circumstances.
While Genders and Partners has taken reasonable care in the preparation of this information, subsequent changes in circumstances (including legislative change) may occur at any time and may impact on the accuracy of this information.
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