Tax on Parents Super after Death

Hi, I have tried to do
Some research and thought maybe you could point me in the right direction. My Dad is terminally ill, and I have financial management orders and look after his finances. He is 64 and we have not touched his super as he has enough money outside super to live off. I was just going to leave it in there as it has good interest but then I discovered that we have to pay tax on it if we receive it as an inheritance. Is it worth removing it now and putting it into his bank account. I will go to an accountant if I need. It’s a bit confusing but will we pay our regular tax rate on the super after he passes? I know it’s a bit morbid talking about after someone dies but any advice would be appreciated.

 

Get some legal and financial advice asap. There are many legal issues to consider.
Withdrawing it now could result in no tax being payable.

3 Strategies to Save Tax on Super at Death 3 Strategies to Save Tax on Super at Death

 

agreed planning will be critical. seek advice ASAP.

at age 64 would have reached preservation age. possibly retired.

as Terry says could be tax free. but after death maybe not. dont delay.

 

You should look at the super fund docs. If your Mum is still alive a reversionary pension might be a better option.

 

Thanks guys, will book an appointment with an accountant. No wife just 4 non dependant kids. I’m think withdrawing most but leaving some in there for insurances is probably the way to go.

 

If self funded, he's not looking at the loss of the pension if he gifts the money before death. Seek specific advice from at accountant who has the appropriate financial advice licence not your normal accountant.

 

Hmmm, I live in a small town there is only 1 accountant! I can go to the city in a few weeks to see someone though. We don’t really need it gifted I’ll just add it to his other accounts and everything will be split evenly between 4. He is unable to use it due to his condition but we have financial control so I am able to sort it out on his behalf.

 

You need to see a lawyer too as you need to consider your duties as attorney or guardian plus the effect this will have on the estate planning aspect. For example as super the benefits may go to person A but as cash they may go to person B.

 

Agree on the importance of all this. One often overlooked issue is to review ALL assets including both super and non-super investments. Does he even have a will ? Super wont be dealt with by a will

A simple matter like a carried forward CGT loss may also be a issue. Selling some shares before death may use this CGT loss which will be lost on death. And leave the shares subject to less tax after death or on inspecie transfer to beneficiaries....Its a hidden tax problem. But just pulling the cash from super needs caution. It could affect his income / assets test and lose entitlements and even affect aged care (assuming he will become unwell) and more. Before doing anything seek legal, financial and then tax advice (in that order).

Addressing what his present tax elements are in his super account should be treated as urgent. The untaxed element will result in 17% !! (not 15%) tax to beneficiaries either directly or through his estate. Accountants cant discuss or advise on these issues as its financial advice.

 

Keep in mind that super can be withdrawn if a condition of release is met. a terminal illness could meet the requirement even if the person is under retirement age

 

Yes - And often takes legal involvement in some instances to get the trustee to accept a condition is terminal. You see a number of law firms do this line of work now because some trustees see the money as theirs.

 

Tax & super | ASIC's MoneySmart

Lump sum withdrawals
If you are aged 60 or over, any withdrawals from a taxed super fund are tax-free. Different rates may apply to untaxed funds, such as government super funds.

If you access your super before age 60 you may pay tax on withdrawals. You can withdraw up to the low rate threshold, currently $205,000, tax-free. This is a lifetime limit and is indexed annually. The threshold does not include the tax-free portion of your super account, which will be returned to you tax-free. Any amounts over the low rate threshold will be taxed at 17% (including Medicare Levy) or your marginal tax rate, whichever is lower.

As per the above quote your dad is over 60 so can withdraw all funds without paying tax (based on source).

 

I should add that the process of withdrawing fund from a super fund is fairly straight forward and generally only involves lodging the appropriate form with proof of ID etc.

One think that you should investigate is whether there is any live insurance or disability insurance associated with the super account.

 

Withdrawal of super is something not to consider until all advice confirms that. Well intentioned and poorly informed family regularly create a mess or waste a lot of time. A simple issue such as a signature or certified power of attorney can delay a withdrawal 28 days and then it is refused. Funds play these games. They think of the member benefits as theirs until actual release occurs. Can be costly. Many funds now want specific evidence about where a benefit is to be credited to limit fraud.

Informed patience is better than rash haste.