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Ask Paul: Loophole to let kids inherit my super tax-free?

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Q. My question relates to tax payable on superannuation left to non-dependants when I die.

I am in my early 70s and my daughters are in their 40s, so if all goes well for me in the time I have left they will be over 60 by the time they inherit!

I understand that any superannuation left to non-dependants will be tax free for the tax-paid component and liable for 15% tax on the untaxed component.

If I was to withdraw all my super when I judge that I don't have much time left and put it in a bank account outside the umbrella of superannuation, would it then be tax free to my family? - Kevin

paul clitheroe tax super askpaul ask paul advice money show

A. Yes, Kevin, without knowing your exact super details, that is correct.

My wife Vicki and I chuckle about this as well. We also hope to live for many more years but we have three non-dependant kids.

The challenge, though, is when to pull the money out of super!

We would be mightily annoyed if we pulled it out too early and then paid tax on the investment earnings.

So our call is to leave it there until we have solid medical evidence that death is close.

Quite frankly, if the worst scenario is that we leave it too late and our kids pay 17% tax (15% tax plus Medicare) on our untaxed component, then that is a First World problem.

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Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
Comments
Sandy
March 25, 2018 4.09pm

Interesting. So what about a married couple aged 59 and 62. If one partner dies and leaves their super to the other, will the surviving partner need to pay tax on it?

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