Leaving super to an estate makes more tax sense, says expert

It is more tax effective to leave superannuation to an estate rather than a binding death benefit nomination to children, says an accounting expert.

.

Peter Johnson, founder of Advisers Digest, told attendees at the SMSF Adviser Technical Strategy Day in Brisbane last week that it is best to only leave a BDBN to children if an individual is genuinely concerned that someone will make a claim on their estate.
 
“Leaving [superannuation] to your spouse has no [tax] consequences, but what if they die? Who are you going to leave it to?” he asked.
 
“What if you have a new spouse? Your kids are going to get nothing. Leaving your super to your kids can be a disaster.”
 
Johnson continued that he often has clients who have made a BDBN to their children and not to their estate because they wanted to make sure there would be no claim on their estate.
 
However, he said the consequences of that decision meant the children would pay 17 per cent tax instead of 15 per cent.
 
“That’s an extra 2 per cent that is taxable income to the kids, and that almost always means they did a Division 293 on their superannuation, which they didn’t hold and it will mean they blow their health insurance rebate,” he said.
 
“And if they're getting childcare support, they lose that as well. Leave it to the estate. It's 15 per cent tax. It's no stress. The estate just puts it in its tax return, pays 15 per cent or could be less, depending on how much income the estate earns for the year, and then it comes out.”
 
Johnson continued that superannuation is not necessarily the most tax-effective place for building wealth.
 
“If you've got $500,000 in a company, and attached to that is a couple of $100,000 of franking credits, and you've got six grandkids, you could put all that money into testamentary trusts and landing each of those kids $20,000 a year,” he said.
 
“It’s way better than superannuation with some planning. For those who would be paying tax, you probably want to maximise what they have in superannuation and then live off tax-free pensions as much as they can. Then you want to make sure that the kids don't cop a massive tax bill.”
 
The SMSF Adviser Technical Strategy Day will move to Melbourne on Tuesday, 22 October and Sydney on Thursday, 24 October. Tickets are still available for these events.
 
 
 
 
 
 
 
Keeli Cambourne
October 22 2024
smsfadviser.com
 

Any advice contained in this website is of a general nature only and does not take into account your circumstances or needs. You must decide if this information is suitable to your personal situation or seek advice.

Rolanda Adams Financial Services have been my financial advisers for over 20 years. I have always found them to be highly intelligent, knowledgeable and professional in what they do. Rolanda Adams Financial Services is accessible at all times and patiently explain terms that I do not fully understand. I can highly recommend Rolanda Adams Financial Services and it is a pleasure to do so. I do this with the utmost confidence. Marcia Montgomery (Retiree – home duties and ex-clerk with Water Board)
I retired Oct 2012, and seeking Financial Advice for my retirement funds, I decided to have Rolanda Adams Financial Services look after my financial affairs, and so happy I did. Since my retirement I am extremely comfortable with Rolanda Adams Financial Services’s advice, experience and strategies and the returns on my investments. Rolanda Adams Financial Services is my "Breath of Fresh Air" at this stage of my life and she makes herself available 24/7 should you need to talk with her. Steve Hoad (Ground Engineer, Qantas)
In 1997 I left Energy Australia and decided to join Rolanda Adams Financial Services for the financial support and advice that I would need into the future. That decision has proved a very good one and I am still with Rolanda Adams Financial Services who have given me advice and friendship over those many years. The advice given has ensured that my investments have been protected and the major loses, of some, during the GFC was not felt by me unduly. Rolanda Adams Financial Services and the team are very easy to contact at any time and one is always received in a most professional manner. I would be most happy to recommend Rolanda Adams Financial Services to all who need financial services. Graham Fleeton (Manager, Property Insurance Group Energy Australia)
Rolanda Adams Financial Services has been my Adviser for the past 18 years. Through their wide industry experience and professional expertise they have ensured the sound development and ongoing management of my investments. Their advice has invariably been sound, timely and entirely tuned to meet my personal needs in retirement. they have a friendly, engaging manner and are always readily available to address any of my concerns. I have no hesitation in recommending Rolanda Adams Financial Services. Neil O'Keeffe (Chief Inspector (retired), Australian Customs Service)

© 2024 Rolanda Adams Financial Services Pty Ltd. All rights reserved. Site by PlannerWeb.