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