How to minimise the tax load on beneficiaries

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Jane is thinking ahead and wants to know the most tax-effective ways to bequeath her assets on her death. She asks Noel Whittaker for guidance.

Q. Jane
I am 71. I intend to leave my house to my grandchildren, and my superannuation to my daughter, as most of my super is my own contribution. Will she have to pay tax on that proportion? And what percentage will she have to pay on the rest? I also have about $75,000 in shares and want to know what would be the tax percentage on those.

Thanks in anticipation of your advice. I have most of your books and love them – plain English and easy to follow. Because of your advice I’m now living comfortably.

A. There is a tax of 15 per cent plus Medicare levy on the taxable component of your superannuation that is left to a non-dependent. There is no tax to pay on the non-taxable proportion.

I note that you say the bulk of your super comprises your own contributions, which I assume are non-concessional contributions made from after-tax dollars. But, even if that is the case, there will still be a certain amount of taxable components.

You should talk to your adviser about giving somebody an enduring power of attorney with instructions to withdraw all your money from superannuation when you believe death is imminent, and pay the proceeds tax-free to people who you nominate. This will get you around the death tax on super.

As far as the shares go, keep in mind that death does not trigger capital gains tax – it merely passes the liability on to the beneficiaries who will pay no tax until they decide to sell. This may be many years down the track.

Do you have a question you would like to ask Noel? Email us at [email protected]

Noel Whittaker is the author of Making Money Made Simple and several other books on personal finance.

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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