Tax on Inheritance - buying PPOR

ive seen people complain about a $330 fee and ended up paying hundreds of thousands in GST. Oh well saved $330 cost $268,000.

 

An apology from beyond the grave.

 

Engraved on the Tombstone?

Of course, one could take the view the dependents probably didn't contribute one red cent to accumulating the assets, so anything they get above zero is a win. Then again, we are talking about tax that hateful, despicable word.

 

The $2K (for example) can be paid from the super - Just like the tax will.

My comment about industry funds reflects experience. These members appear more motivated by belief in low cost and are often less engaged in their super outcomes. Low cost can also reduce investment options and the "mandated" hold on investments may be a higher risk than some other super accounts. eg The fund strategy says hold x% in international shares even if they are a sell. The fund is not permitted to sell down to 0% and buy in at the bottom.

Regretably many funds are seen by members as peddling financial planning services rather than seeing the value in the services. The fund isnt allowed to promote the benefits as that could be seen as financial advice and when they do its misinterpreted as a hard sell. Its a catch 22 position.

 

Hi All,

Thanks for the great insights - I'll pass the details on. I'm hoping this can be a good wake up call for others here that have not properly planned their Superannuation to avoid this type of situation.

Cheers
JohnFS

 

Best to learn from the mistakes of others

 

The OP's post has got me curious and this post of mine is only out of interest on my part and consists of numbers I've constructed out of thin air.

Widow is a superannuate. Dies and has only one non-Tax Dependent who is named in the Binding Death Benefit Nomination to receive 100% of the death benefit. Assume it's all for the 2016-2017 tax year.

Amount remaining in superannuation to be paid out on death is $1M with $550,000 being tax free and $450,000 as taxable.

Beneficiary has a salary of $80,000 per year and has a HELP debt of $60,000.

My understanding the tax-free component isn't included in the tax return (or is it?) and the following crunching of numbers is:

Taxable Income: $80,000 plus $450,000 equals $530,000

Normal Tax Payable: $211,700 (about)

Add Medicare Levy: $10,600

Add HELP: $42,400

Add Budget Repair Levy: $7,000

Total Tax: $271,700

Net amount: $258,300 ($530,000 less $271,700)

Is that right way of looking at it?

 

Assuming the taxable component is taxable-taxed - maximum tax rate is 15% on the lump sum, so not quite that bad.
You could also add medicare levy surcharge if applicable.

 

Thanks @qak. Trouble I have is I'm a doofus with understanding this stuff. Responses from qualified people is good but sometimes, while they know what the situation is in detail, I don't and only get a glimmer of comprehension.

Even if I did fully understand and were able to pass that on, I'd still strongly advise my Executor (and I've included that advice in my Will) not to do a DIY and place it in the hands of professionals. Not worth getting it wrong just to save a few bucks unless you're very well versed in the subject matter.

 

Sort of. The tax offset is the missing piece. Tax on some super benefits comes with a tax offset so that the tax on the super element is only 15% + all the other bits. The formula for the offset is complex intended to address the marginal rate of tax on the death benefit v's the 15% (or 30% from some funds !!) that is payable

 

Ummm - You missed the point that you should consider tax reduction strategies BEFORE you die. Changing a death nomination to the estate or changing a will probably wont help one bit. The tax strategies should ensure as much super is tax free before you die so that beneficiaries dont get thumped with tax.

 

Appreciate your comments @Paul@PFI. I was simply making up a hypothetical in the example above to try and understand the taxation aspects.

I know in my case using the lump sum withdrawal and recontribution strategy plus other non-deductible contributions over a number of years about 96% of my superannuation is tax free.

Apologies if I appeared obscure about my Executor placing matters in the hands of a professional. What I was attempting to say, badly, is after my death while the taxation aspects and estate administration may seem straightforward, it isn't the case so I have suggested to my Executor not to hesitate in seeking professional advice when necessary.