The Hidden Super Inheritance Tax:
Why Your Adult Children Could Lose 17% of Your Super
Learn the simple Re-contribution Strategy to save your family thousands.
Imagine leaving your children a substantial inheritance, only for the ATO to claim 17%. This is the hidden reality of Super Inheritance Tax for non-dependants.
This guide reveals the 17% Tax Trap. Your superannuation death benefits are vulnerable if you have adult children. Discover the simple, legal Re-contribution Strategy used by experts to convert taxable super into a tax-free inheritance.
Keep reading below to see the powerful impact of proactive planning and how much your family could save before acting.
Why the Super Inheritance Tax Exists
For many working Australians, superannuation is the cornerstone of retirement planning, built under the assumption that it is always tax-free. While that is often true for the account holder, the rules change drastically when the money is passed on to non-dependants, such as financially independent adult children. This creates the liability known as the Super Inheritance Tax.
Taxable vs. Tax-Free Components
Your total super balance is composed of two parts: the Tax-Free Component (contributions already taxed, like non-concessional contributions) and the Taxable Component (employer contributions and investment earnings that received a tax concession during your working life). The government views the Taxable Component as having benefited from a tax break intended only for your retirement. When this money is inherited by a non-dependant, the government steps in to reclaim those tax concessions, resulting in a 17% tax applied to that component.
Let’s quickly identify the 17% cost to your family’s financial legacy.
How the Tax Trap Hurts Your Family’s Inheritance
The Real Cost of Doing Nothing
If your independent adult children inherit a taxable super balance of $500,000, they are immediately faced with a Superannuation Death Benefits Tax bill of $85,000. This often requires them to draw down the money just to pay the tax. This unexpected liability significantly erodes the legacy you intended to leave and can cause financial strain at a time of grief. This highlights why proactive tax planning is essential to protect your family from the 17% Tax Trap.
The Powerful Strategy to Eliminate the Tax
The good news is that the Super Inheritance Tax is often considered a voluntary tax because there is a safe, legal strategy that can mitigate or eliminate this liability altogether. This planning revolves around restructuring the components of your super fund while you are alive and able to make contributions.
Introducing the Re-contribution Strategy
The Re-contribution Strategy is a powerful mechanism used by financial planners to convert the undesirable Taxable Component of your super into the preferable Tax-Free Component. The strategy involves withdrawing a lump sum (which is tax-free for those over 60) and immediately re-contributing it back into your fund as a Non-Concessional Contribution (NCC). By doing this strategically, you effectively “wash” the money, making it 100% tax-free for your adult children upon inheritance. However, this strategy is limited by specific contribution caps and must be timed precisely, making expert advice mandatory.
Download the free guide now to get the expert, step-by-step plan for the Re-contribution Strategy.
Your Financial Experts: Stop the Super Tax Trap
Ready to Protect Your Legacy?
Understanding the mechanism of the Superannuation Death Benefits Tax is the first step. The second is acting on the solution.
Our free guide, The Unnecessary Inheritance Tax, provides the full step-by-step methodology, charts, and case studies detailing how to implement the Re-contribution Strategy without breaching contribution caps or jeopardizing your retirement income.
Don’t wait until it’s too late. Download the complete guide and secure your family’s inheritance today.