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Superannuation Planning: How Much Do You Intend to Bequeath to The Government?

Although Australia eliminated the inheritance tax for those who passed away after June 30, 1979, this doesn’t necessarily mean that no taxes are payable on your own estate when you pass on.

In fact, those who receive your estate may have to pay taxes on both your estate and any capital transactions that may occur following your demise.

The good news is that any cash you leave your beneficiaries will not be taxed, as it is not considered to be income by Australian law.

If you leave your home to your beneficiaries and they sell the property, any proceeds received from the sale will be non-taxable, as well as free from capital gains tax.

However, any investments or other assets you transfer to your beneficiaries may be subject to the CGT. An interesting thing to note is that the payment of the CGT will be deducted from your estate if it is the estate selling the investment instead of your beneficiary.

Taxes, Your Super and The Executors

Your super, should you leave it to any beneficiaries not considered to be dependents will be subject to a tax of 16.5%. This percentage rises to 31.5% if the funds are considered to be untaxed super funds.  This tax also includes values like that of the insurance portion of your super.

But the following may come as a relief to you; the executor or executors of your estate are the ones who will be responsible for determining which taxes may apply and how much money needs to be paid to the government from your estate. Following the payment of taxes, your executors can then distribute the remainder to the one or more beneficiaries you have designated.  This means that your beneficiaries won’t have to worry about paying extra taxes once they receive their portion of your estate.

Property Inheritances

Experts recommend that anyone named as a beneficiary to an estate keep detailed records should they inherit the property of a person who died on or after the September 20th, 1985 unless:

–          The property was residential, and not used for the purpose of generating income;

–          The property was your main residence right before you passed away;

–          You bequeathed the property to your beneficiary after the 20th of August, 1996.

Where the above circumstances apply, it will be assumed that your beneficiary acquired the property at market value on the day you passed away.

If you acquired your property prior to September 20, 1985, the market value of that property will need to be known as of the date of your death. As well, related costs, such as those incurred by trustees and executors will also need to be known, as these costs will reveal how much it will be assumed the acquisition of the asset cost you.

There’s no need to fret about how much in taxes that may be due once you’ve passed on, the main thing is to know you have a well thought out retirement plan underway. To get your retirement planning on the right track, download a copy of our free guide: today or better yet get in touch with us.

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