Death Tax- Bonus – Financial Planning Ascot Vale

Posted on 27. Oct, 2010 by in Financial Planning

Financial Planning Ascot Vale Death TaxWhen someone dies it’s fair to say there are a range of issues the family has to deal with including organising a funeral, financial considerations, processing insurance claims, gathering all data from accounts, changing property titles not to mention the emotional trauma.

As Financial Plannners in Ascot Vale, inevitable we are engaged to assist our clients’ family through the process. As a first comment I would say it is so important to have an updated Will that reflects the intentions of the will maker. We have experienced situations where wills are totally outdated therefore do not reflect the changed circumstances and which can result in further emotional stress.

Today’s blog at AboundLP is to do with death and the potential for the estate to claim back tax from their superannuation fund. The technical terminology for claiming back this tax is “anti – detriment payment” now what is this? An anti detriment payment is a lump sum payment in addition to the deceased members account balance. It is only payable where a death benefit is being paid out as a lump sum. This payment represents the 15% tax paid on concessional contributions received by the superannuation fund during the life of the deceased. It should be made clear this payment can only be paid to a spouse, former spouse or child of the deceased member.

Why is this additional payment made?

In 1988 the government ( Keating) introduced 15% contributions tax and the tax on lump sum payments was reduced by the same amount, the govt argued this was a bring forward of lump sum payments rather than a new tax! The argument was flawed because lump sum amounts paid to spouses were always tax free hence the govt compromised by introducing the anti- detriment payment which acts to refund the 15% contributions tax where lump sums are paid out to family members.

Tips/Traps

Not all superannuation funds pay the anti – detriment. Why? We can only assume that it is because it creates another layer of difficulty / administration. So in choosing a fund it’s important to ask whether or not they can pay anti-detriment payments. You may say is it worth the hassle …well I’m currently involved in a claim now and the expected payment to the estate is approx $40,000 on a superannuation balance of $300,000!

Is this payment taxable?

As the payment is made part of a lump sum normal taxing rules apply i.e. if paid to dependant spouse/ child no tax is payable however if paid to a non dependent child then 16.5% tax applies.( Medicare levy included)

 

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