ATO increases taxes after death

As the old saying goes, there is nothing surer than death and taxes – and under a new ruling issued by the Australian Tax Office, this couldn’t be more accurate. The new ruling states that spouses and children of loved ones could be forced to pay capital gains and income tax on the assets of the deceased. In simple terms, pensions received by beneficiaries are no longer tax-free.

So what does this mean for you and your loved ones?
Beneficiaries are already required to pay a 16.5 per cent death benefits tax but these bills could soon climb to six figures with the addition of a capital gains income tax on private pensions. Of course, it all depends on the estate of the deceased individual. If you have held shares or property for a long period of time, your loved ones could be facing taxes in the hundreds of thousands.

Who will be hit the hardest?
Beneficiaries of those with self-managed superannuation funds are likely to feel it more than others. Under the ruling, your adult children will have no choice but to pay the extra tax. Of course, if you have no spouse or dependent child you are more likely to be exposed.

Can the tax be avoided?
There are strategies you can put in place to minimise the tax bills you will leave your family. For example, if your superannuation fund deed states that after your death, your assets are distributed in the form of a pension rather than a lump sum payment, your spouse or dependent children may be able to avoid paying the tax. If you are concerned about the future of your estate, it is best to discuss your options with a licensed professional.

For more information on how you will be affected, contact your tax advisor or visit the ATO’s website.

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