Pittwater Life July 2024 Issue

Business Life: Money
with Brian Hrnjak
Business Life
You can’t take it with you...
and definitely not tax-free
This month we look at
aspects of what happens
to your super when you
die… People are often surprised
to learn that superannuation
balances do not necessarily
form a part of their estate on
death. If you spend any time
at all thinking about this stuff,
a superfund is really just a
trust with a different tax jacket
on. Trusts and superfunds are
governed by their trustees.
When you die, the assets that
are held directly in your name
pass into an estate governed
by an executor, another form of
trust and trustee arrangement.
Depending on what you own
and how you own it, assets
held by you at death will pass
to your estate under the control
of your executor. Assets that
you hold jointly with another
person will bypass your estate
and move to the surviving joint
owner and your super balance
will fall under the control of
your super trustee who may be
acting on behalf of a public offer
fund or possibly be a member
of your own family in the
case of a self-managed fund.
These topics in my grandparents’
generation were
not so vital as there was no
super – super for most people
started after 1992, most things
my grandparents owned were
held jointly and frankly, new
migrants to Australia didn’t
have that many assets to worry
about. Move forward a couple
of generations through the
many Sydney property booms
and into a time when super may
now be your second biggest
asset, some thought might be
warranted about who gets what
when the time comes.
Compounding this complexity
are legislative definitions
about who is a dependent and
who can receive your superannuation
death benefit (see table).
I’m not here to write a legal
self-help book in the short
space I have available, but the
superannuation law spells out
who you can leave your super
to, the tax law determines how
it will be treated. The catch all
for when there is no-one in these
categories is your legal personal
representative – your executor in
other words – the person responsible
for your estate.
You’ll notice that parents, for
example, are not in any category
and it’s here that we start to
experience some of the tensions
in the system. What happens
if your parents are dependent
on you? Or if an adult child is
dependent on the parent? Why is
it even important?
People tend to understand the
fundamental tax benefits of the
superannuation system: money
going into super is taxed at
15% (and another 15% for those
earning over $250,000 adjusted
taxable income), which is low
compared to the highest marginal
rate of tax. Funds in super
are taxed 15% on their earnings,
unless the fund is in pension
phase. Funds leaving super as a
pension, or lump sums are tax
free for those over 60 years of
age.
Death benefits, however, are
only tax-free if they are paid
to those who are dependents
54 JULY 2024
The Local Voice Since 1991