Medicare levy rise spurs estate planning considerations

In light of the Medicare increase, SMSF practitioners may want to consider whether clients should direct their superannuation benefits to the estate, rather than to individuals, says a financial services firm.

Speaking at a seminar in Sydney, HLB Mann Judd partner Michael Hutton said SMSF trustees in some cases might be better off directing lump sums to the estate rather than to specific beneficiaries.

“There are a couple of reasons for that largely because you can then incorporate testamentary trusts into your will,” said Mr Hutton.

The other reason for directing it to the estate, he said, is that the tax outcomes may be better if it’s being paid to adult children, particularly with the proposed rise in the Medicare levy.

“If it is paid directly to the adult children, rather than to the estate, [they will be] paying 15 per cent tax on part of the benefit that they receive. It also comes with Medicare levy and the Medicare levy is getting pretty high, 2.5 per cent, after 1 July 2019,” he said.

If it’s paid directly to the estate, on the other hand, there’s no Medicare levy that needs to be paid.

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