New tax on allocated pensions/death duties

[Julia]

There was a radio report this morning that the ATO announced last Friday that - on the death of the holder - allocated pensions would be taxed in the hands of the beneficiaries of that estate. There was an interview with someone who sounded like a financial adviser and who was quite definite about it.

I have done a quick google for a link but nothing comes up so far.

So it looks as though once again Bob Brown is getting his way with his desired death duties. Maybe the family home will be next.

 

[Junior]

I'm not sure about any new announcement, but my understanding of the current rules are:

- the 'taxable' component of any superannuation is taxed at 15% upon death, if the benefits are paid via the estate to a non-dependant (ie. somone who is not a spouse or dependant child)

A strategy exists called 'withdrawal and recontribution' whereby you withdraw your extire superannuation benefit as a lump sum, and then contribute back into superannuation as a non-concessional contribution (if you are eligible to contribute and have room in your contribution caps). This effectively makes your superannuation all 'tax free' component, thereby avoiding any potential tax issue upon death.

 

[sptrawler]

That's my understanding of it as well Junior, the 1.5% medicare levy might be on there as well.

 

[Julia]

For anyone with the fortitude to read it here is a link from the ATO to this which is apparently just a draft at present. The person to whom I spoke at the ATO suggested they will 'welcome feedback on this'.

http://law.ato.gov.au/atolaw/view.htm?docid="DTR/TR2011D3/NAT/ATO/00001"