How to avoid extra tax when a superannuation fund gifts a death benefit to an estate.
It comes as a surprise to many when they learn they don’t own their superannuation. The super fund holding their savings is a trust, where the legal owner of everything in the trust/fund is the trustee. Each member has a parcel of rights in respect of their account, but those rights fall short of outright full legal ownership.
The member’s spouse, minor children, dependants and interdependants pay no tax on the super received. All other recipients pay tax on the taxable component of that super receipt.
The tax payable in respect of a gift of a super death benefit to a TDT in the will has been reviewed in a private binding ruling issued by the Australian Taxation Office. The ruling confirms that in order for no tax to apply, there needs to be certainty that only the member’s death benefit dependants will benefit from the super.
Because that range of possible beneficiaries is so large, it cannot be said with any certainty that the super will only go to the member’s eligible death benefit dependants. As a result, tax is payable by the trustee of the TDT on the receipt of the super.
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