As seen in Woopi News January 2024
Did you know that your Superannuation doesn’t automatically form part of your estate when you die? It is important to nominate who you want to receive your Superannuation; this is generally your spouse or children, but not always. You can nominate to leave your superannuation to your ‘legal personal representative’ so that it is included in your estate. If you do choose to leave your superannuation to your ‘legal personal representative’, you need to ensure that your solicitor is aware of this and that they update your will accordingly. You may even want them to review the nomination before sending it to your Superannuation fund.
Some Binding Death Benefit Nominations (BDBNs) lapse after 3 years, so it is important to check your nomination is still current and if possible, opt for a non-lapsing nomination which can be updated if necessary but won’t expire without your knowledge leaving you exposed to the consequences of not having a valid nomination in place.
So, what are the tax issues that may impact your nomination? As I said above people generally leave their super to their dependant spouse or their children, who could be considered dependent children or non-dependent (adult children). When Superannuation passes to a dependant spouse or child, the amount received is tax-free (regardless of its components). When Superannuation is left to a non-dependant adult child there may be a taxable component of the amount received that needs to be included in their tax return. Tax is withheld from the payment by the superannuation fund to ensure that the amount isn’t being double taxed. How the taxable component is worked out is dependent on how the superannuation was treated when it was contributed to the superannuation fund originally. Strategies can be implemented to reduce your taxable component and increase your tax-free component, however, tailored financial advice should be obtained from an appropriately qualified adviser to ensure that all the conditions are met, as the consequences of getting it wrong can be costly.
Stasha Dunn - StaySharp Accounting
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