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New tax proposed on death benefits

New tax proposed on death benefits

Miranda Brownlee
22 February 2016

Taxing bequest amounts above $35,000 that come from superannuation could be an effective way of preventing super being used as an estate planning vehicle, according to one academic.

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?'."

New tax proposed on death benefits
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