This can be a particular issue where you:
- Are splitting your assets amongst your children – for instance, you leave the house to one child and your super to another; and/or
- You have some children that are dependents and some that are not!
All lump-sum death benefits are tax-free if paid to a dependant (for tax purposes).
Lump-sum death benefits paid to non-dependants (for tax purposes) are taxed at 15% plus the Medicare levy (for elements taxed in the superannuation fund) or taxed at 30% plus the Medicare levy (for elements untaxed in the fund such as insurance proceeds).
This could leave a large and potentially unintended after-tax difference if it isn’t well planned for.
WHAT IS A DEPENDANT FOR TAX PURPOSES EXACTLY?
- Your legal or de facto partner or another person with whom you are living together on a genuine domestic basis as a couple (including same-sex couples)
- A child under 18 years (including an adopted child, stepchild, ex-nuptial child, or child of a member’s partner)
- Any person financially dependent on you at the date of your death
- A person with whom you have an interdependency relationship.
WHAT IS AN INTERDEPENDENCY RELATIONSHIP?
It is where two people (whether or not related by family):
- Live together
- Have a close personal relationship
- One or each of them provides the other with financial support, and
- One or each of them provides the other with domestic support and personal care.
An interdependency relationship can also exist where there is a close personal relationship between two people who do not satisfy all other criteria for interdependency because either or both of them suffer from a physical, intellectual or psychiatric disability.
If you want to evaluate your intentions for your superannuation and/or life insurance proceeds, Yield can help.
Information provided is in accordance with our disclaimer – users should ensure they read our disclaimer before continuing to use our site
“GOOD FORTUNE NEEDS GREAT PLANNING”
The content of this presentation is intended to be general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should consider its appropriateness having regard to these matters or obtain relevant professional financial advice before making any financial decisions. Examples are illustrative only. Each person should obtain any relevant professional financial, taxation and social security advice before making any financial decisions.