Why you may need a tax advisor

There are no death taxes in Australia….wanna bet??

Recently we have done some work with 2 different clients that have collectively saved their families close to $100K.

In the first scenario the clients had funds in super, were retired and living pretty much happily ever after….until the expired sign started to appear, cancer was taking its toll…life expectancy was reduced to months.

During these tough times if you can find time to connect with your tax advisor there are a couple of strategies that can help keep more money in the family than being paid in tax:

  1. Super funds left to a dependant spouse are received tax free.  If the same funds are paid to non tax dependant beneficiaries (e.g. adult income earners) these funds are taxed.  Super money can be directed separate from your will via death benefit nominations.
  2. Also note that super monies can be made up of different categories; taxable & tax-free components.  Withdrawing funds from the ‘right’ segments and having those funds form part of your normal estate, as distinct from your super fund can save thousands in tax.
  3. Super money withdrawn by members over 60 is tax free in their hands whilst they’re still alive, so funds could be taken out of super and gifted prior to death, or taken out to form part of the general estate.  Any capital gains tax implications in the super fund will need to be considered if this requires sale of assets though.  Restrictions on putting money back into super also need to be considered.

Super law changes in recent years mean that care needs to be taken with super strategies and it is recommended that advice be sought wherever possible.

The second scenario involved a deceased person who had a reasonable level of investment income mostly from shares.  The transfer of those shares or assets to adult beneficiaries resident in Australia is not in itself taxable, however it will likely add income to their pre-existing income levels thus creating a tax on that additional revenue at the marginal rate.

However, if the finalisation of the estate takes up to 3 years, that income will be taxed with the benefit of a tax free threshold, so that the first $18,200 is tax free plus the potential for imputation credits to be refunded.

Further to this, if time is on your side and you can still implement new estate planning strategies, a testamentary trust could be worth considering for the financial protection and benefit of your family once you’re gone.

There is a well known truism that there are only 2 certainties in life = death and taxes.  A good tax advisor can certainly help when those worlds collide!

Everyone’s situation is unique. Contact your local office and see how Accru can help you. 

About the Author
Michael Burnett , Accru Hobart
Michael recognises that most small business owners and committee members have a real love of what they do and a desire to control their own destiny. He makes their financial and tax issues as hassle-free as possible, so they can spend more time working on parts of the business that they enjoy and make them more successful.
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