Does Australia Have An Inheritance Tax?

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When someone passes away, the transfer of assets such as their home, investment properties and shares are transferred to their loved ones, as outlined in their Will.  For this, Capital Gains Tax and Stamp Duty do not apply. 

A hidden gem that we often see people getting caught out by, is the tax on superannuation death benefits.  If a person leaves their superannuation death benefits to a financial dependant then the recipient will not pay tax on the payment.  Whereas if a person leaves their superannuation death benefits to someone who is not a financial dependant then they will have to pay tax on the superannuation payout.   

For the purposes of working out who is a financial dependant in this sense, they must be: 

  • A spouse (including a de facto and including same-sex spouses) 
  • A child who is under 18 years old 
  • A child (or anyone else for that matter) who is over 18 years old, who can prove that they were lived with the deceased person, was financially dependant on them, and one of them provided domestic support and care of the other 

What is the tax rate of superannuation payouts? 

Unfortunately, it’s not a fixed value since the tax payable depends on: 

  • The value of the taxable component and the tax-free component of the death benefits 
  • Whether the deceased person was in a taxed scheme (roughly 90% of people belong to such schemes) or in an untaxed scheme (many long-term public-sector funds) (ie. whether the super fund has already paid tax on the taxable component) 
  • Whether the death benefit is paid as a lump sum or income stream 
  • The age of the recipient and the deceased person when they died (for income streams) 

Superannuation recently became even more difficult 

The Federal government has also imposed a $1.6 million cap on the amount of super that can be transferred into the retirement phase, as of 1 July 2017. 

While superannuation can be a very complicated area, we are here to make it easier for you. 

For an obligation free chat, at no cost, you can email us or call 07 3828 2095.

 

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