Speaking at the SMSF Association conference, Monash University professor of finance Deborah Ralston stated that estimates from Rice Warner for 2014-15 show around “8.6 billion of super was transferred in bequest”.
“That’s a bad story because we’re not using that money as effectively as we might,” said Ms Ralston.
“I think it’s a worry, if you have a system which has very strong incentives for the family home and superannuation to be accumulated, and you have no wealth tax at the end, you’re setting up a situation for bequest.
“So I can see the value of a tax for say over $35,000. Something that leaves you to have a natural kind of capping.”
SMSF Association head of policy Jordan George said it was partly a cultural issue of children attempting to deter their parents from drawing down on super or undertaking equity releasing strategies in order to have a greater inheritance.
“There is a cultural issue of kids stopping their parents releasing equity from the family home to pay for their income,” said Mr George.
“It’s what the large banks are worried by, and advisers are too, because on the Friday you have the client who says ‘Yes I’m happy to enter that reverse equity product’, and then on the Monday you have the kids coming in and asking ‘What have you told my father? Why have you made him sign this?’.”
Why should we be trying to prevent super being used as an estate planning vehicle anyway? The government forces compulsory contributions in lieu of wages, and people are encouraged to contribute more as well. If people have done that, had enough to fund their retirement, and have some left over I think they have every right to make bequests as they see fit. I don’t see what using the money effectively has to do with it at all. It is THEIR money and I don’t agree with a tax that is being proposed as a punitive measure against perfectly reasonable behaviour when the real reason is that it just another excuse to transfer control of wealth from individuals to the government.
Don’t we already have a tax on the death of a member if the benefit is not paid to a dependant? So I pay a tax on the way in, tax on earnings, and my dependants pay tax on what I don’t spend. Heck of a deal! And you want to limit how much we give our children who may need it to put a deposit on a house, pay off some debt etc? Shouldn’t we encourage spending not limit it by punitive taxes or putting a limit on how we can access our savings? Let’s remember the reason we have super, many plan their savings for their retirement and are not a burden on the tax system by claiming age pensions. For those through circumstances are not able to we have the age pension safety net. We need to understand that those who carefully and diligently save for their retirement are not about to go and blow the whole lot at the pokies,they are financially aware and understand what kind of lifestyle they want to live in retirement and plan accordingly. Don’t take more of our freedoms of choice away !
How much of the $8.6Billion transferred was from the accounts of people under the age of 65? How much of this $8.6Billion was made up of insurance proceeds? This money would be paid out to the spouse and dependants to provide financial support, as is the intention with super.
The idea that superannuation funds are Treasury’s money is indeed an interesting proposition. If it were so, Treasury would be adding super guarantee contributions to its computed rates for Australian income taxes vis vis OECD averages. The fact that such suggestions can yet be made is a rather good example of the climate of unprincipled taxation which has driven so much of the world’s financial wealth offshore to tax havens – which are then abused for not being as greedy and stupid as the so-called advanced countries.
This is another example of people not researching about the topic they are writing about.
If someone dies with money in super, their is tax paid on the taxable portion paid to non tax dependents. That is generally anyone in the family that is not the surviving spouse or under 18 years of age. the non taxable portion is money that the deceased super member put in themselves from after tax sources so it should not be taxed again.
This sort of talk should be stamped on immediately.
Thats a bad story because were not using that money as effectively as we might, said Ms Ralston.
Since when, Ms Ralston, are you or anyone else the judge of how private individuals use their own wealth? This is not government money, it is privately owned money and it is nobody’s business how it is used. People are perfectly entitled to leave the remainder of their estate to their children if they feel like it without busybodies like you interjecting. Tax is nothing but legalised theft levied by incompetent and profligate governments and we want less of it, not more. Address the problem: wasteful government spending and a moronic, feckless, lazy, voting underclass of parasites screaming for entitlements, most of whom have never lifted a spanner in their entire life.
Well it is indeed an academic comment which overlooks the obvious behavioural response – to limit voluntary super contributions and/or leave a pre-signed trustee resolution to withdraw the lot and a signed cheque. And the tax rate on death benefits to adult dependants is hardly trivial. It is amazing how often “bright” policy suggestions create more work for tax lawyers.
Lets not forget that there is already a “death tax” on super. Payments to non-dependents are taxed at top marginal + medicare of the taxable element.
Given Scott Morrison’s comments at the conference, I expect that on death, the tax-free element will be ignored on the payment of a death benefit, thereby creating more tax revenue, stop super being used as an estate planning tool, and eliminate the need for re-contribution strategies.