Hi There I was recently given the below info, in order to show just how much the Government is going to take from your SMSF when you die. Everyone should be aware of this or you can lose 26.5% of your assets. SMSFs and Taxes when you Die On Death super payouts are hit by taxes, and SMSFs are the worst-affected. GRIEVING families and friends are being hit with a double whammy death tax on their loved one's superannuation payouts, which is slashing inheritances by up to a quarter. Self-managed super funds are worst affected, with beneficiaries of these funds not only slugged the super death tax but also capital gains tax. According to industry experts the law needs to be changed to avoid the hefty toll, which is forcing many people to withdraw their total super before they die, to avoid leaving a large tax bill for their beneficiaries. "There is a misconception that only income is taxed but the capital value of the entire death benefit may (also) be subject to tax," Life Plan adviser Alison Massey said yesterday. If the person withdrew all their money from their super fund and put it in the bank or other cash deposit, even just a day before their death, this tax would not apply, Ms Massey said. The 16.5 per cent super death tax applies to all death payouts. It is triggered when money from a super fund is left to anyone who is not classified as a "dependent" person, such as an adult child or grandchild, a friend or relative. Basically, anyone who receives part of a superannuation death payout and is not financially dependent on the deceased person will have to pay tax on the inheritance at the rate of 16.5 per cent, Ms Massey said. The tax also applies if the super payout is paid out through the deceased person's estate through their will. However, the tax hit is even worse if the fund is a self-managed super fund. In these cases the money is also hit with capital gains tax. With more than 2500 new self-managed funds set up every month people are unwittingly handing beneficiaries an unexpected tax bill of up to 26.5 per cent. The problem arises when the last person in a self-managed fund dies, SMSF Professionals' Association of Australia (SPAA) vice chairman Graeme Colley said yesterday. Up to their death the fund has not had to pay capital gains tax, however the day they die a self-managed fund losses this exemption, Mr. Colley said. To close the fund and pay out money, the assets must be sold or transferred, which triggers capital gains tax at a rate of 10 per cent. Mr. Colley said this comes on top of the 16.5 per cent death tax affected, which SPAA had made submissions to the Federal Government to try to have removed. The death tax discriminates against children over the age of 18, when they are no longer considered to be dependents, he said. "It certainly sticks in the craw of a lot of people, when you can withdraw that money from super, right up to the day before you die, and no tax would apply," he said. Comments on this story ATO not 100% evil of Adelaide Posted at 5:24 PM September 01, This article glosses over a key point on financial dependency. Heaps of super payouts go to financial dependants (spouse/ minor children etc) and are tax free anyway. The 16.5% tax only applies to taxable portion of super (not the whole lot - which includes a tax free component) and good super funds will often pay anti detriment payments which negate or reduce the tax to non-dependants that actually need to pay it. W.Hawil of Adelaide Posted at 9:43 PM August 8 The Australian Super is just a big fraud.More than 70% of retired persons depend on the full or part Centrelink pension, and that will be the same for next generation.When the meanest "Means test" cuts in at a very modest income allowed for the ful age pension, the loss is 40% of Centrelink pension and from Sept.2009 it will be 50%. The fairest social system would provide every person of pension age with the full age pension, and the pensioners should be taxed the same as everybody else apart from the seniors discounts which are necessary, because older people cannot do things like cutting their own lawns or painting their houses, thereby incurring extra expenses and tradesmen today do not come cheap Evie of dreamin of PR Posted at 9:53 PM August 3 What I would like to know is who makes these new rules up for the ATO and how the hell do they even pass or is this the ATO making them up as they go along and to hell with the people of Australia. Still trying to screw this country even before you get stiff!!! Important Note If you sell a property before you die, [which is presently held in trust by your SMSF], then the proceeds of the sale is not subject to Capital gains Tax, or inheritance tax, if you hold it in cash and you can then use it as you wish. You can keep it in the SMSF as cash, or bank deposit, and pay no tax on the income. Or you can draw it out, and your beneficiaries will not pay any tax on it. But if the proceeds are in cash, and held in your SMSF and you die, your beneficiaries will have to still pay 16.5% tax on the cash,[added to their taxable income in the year of receipt], but NO Capital Gains Tax. So smartest thing is to sell all items subject to CGT well before you die, and live on the cash. You should remember that these are our assets, on which we have paid more than our share of Taxes over the years, and we are saving the Government by not using Centrelink benefits, so we should not have to pay more taxes when we die. eom
Yes, liquidate and cash out of your Super (not just SMSF's) the day before you die otherwise the "tax free" returns your super has made during the pension phase are taxed at 15%. Not easy to know what that day is in advance unless you are contemplating euthanasia ! Alternatively in a SMSF sign and undated letter requesting your entire balance be paid out to you and leave it with the other trustee (wife, children whoever) and in the event you die they just date the letter the day before your death, hence no taxes.
No doubt the collectivist scum will close this loophole eventually... anything to put their thieving paws on your property!
Yippe something else we agree on. Molotov cocktails also have their place in an SMSF when the thieving bastards try. Kind Regards non recourse
