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Where Does Your SMSF Go When You Die?

Estate planning is not one of the more pleasant things to think about, but it can be comforting to know where your Self-Managed Superannuation Fund (SMSF) is going to go when you die. It can also be comforting to know that taxes won’t consume a large portion of their inheritance. Here are some of the fundamentals of where an SMSF goes when you die and how taxes are paid.

According to the Australian Securities and Investments Commission (ASIC), it is recommended to fill out the form which determines where your money is supposed to be distributed in case of your death. This can keep your family’s money from being “tied up” in their time of grief. (1)

Estate Planning For SMSF

If You Die, Who Gets Your Super?

In the case of your death, the trustee of your super pays the money, known as your “death benefit,” to your dependent, dependents or estate. Your dependents include your spouse or same sex de facto partner and your children. It can also include anyone with whom you were financially interdependent or anyone who was dependent upon you financially. (1)

Usually, your super fund will allow you to nominate, in a binding or non-binding fashion, the person or people to whom your death benefit will be paid. (1)

Binding Nomination

A binding nomination forces the trustee to pay the death benefit to the person or people you specified. You can choose whether the money be paid to one or more dependants or to your personal legal representative, who then pays it out according to your will. (1)

Non-Binding Nomination

A non-binding nomination is more of a guide to your trustee as to who gets your benefits. However, it is the trustee who makes the final decision. The trustee is not bound to follow the instructions you left in your will. If you nominate someone who is not a dependant, the trustee will still have the option to give your death benefits to dependants, instead. (1)

Factors for Taxing a Super Death Benefit

According to the Australian Taxation Office, taxation on super death benefits are dependent upon a number of factors: (2)

Whether the benefit is paid to a dependant or a non-dependant person. (2)

Whether the benefit is paid as a superannuation income stream or a lump sum. (2)

Whether the SMSF is tax-free or taxable and whether taxes were already paid on the taxable portion by the SMSF. (2)

The age of the SMSF owner when they died. (2)

The age of the person receiving the death benefit. (2)

Tax Implications

Dependants are not required to pay taxes on a lump sum benefit. If the benefit is paid as an income stream, taxes will be computed accordingly. If either the deceased or the beneficiary is more than 60 years old, the taxed element requires no payment. The untaxed element is paid at the beneficiary’s marginal tax rate with 10% subtracted as an offset. (2)

If neither the deceased nor the beneficiary is 60 years of age or older, the taxed element is taxed at marginal rate minus a 15% offset. The untaxed element is taxed at the marginal rate. (2)

Call Approved Financial Planners Today

At Approved Financial Planners, our estate planning advisers can help you make sense of an ever-growing web of regulations and paperwork. We have the know-how to help ensure that your SMSF is going where you want it to when you die.

Call us today: 08 6462 0888.

(1) Australian Securities and Investments Commission, MoneySmart, “Super Death Benefits,” 21 August 2015.
(2) Australian Taxation Office, “Superannuation Death Benefits,” 4 June 2014.

Is a Self Managed Superannuation Fund (SMSF) Right for You?

A self managed superannuation fund (SMSF) is great for some people, but inappropriate for others. Our financial advisors have over 40 years combined experience in the Perth area. One of the things we have learned at Approved Financial Planners is that no person’s financial situation is the same as another’s. Consequently, you will need an individual consult before you know whether an SMSF is right for you.

Advantages of SMSF

An SMSF allows you to exercise greater control over your financial future. You decide where your investment money goes. You are free to choose an aggressive strategy if you want, dependent on how averse or open you are to risk.

Is Self Managed Superannuation Fund Right for You

Since an SMSF is usually obtained by paying fixed fees while industry and retail super funds receive a percentage of the funds you invest, those who have more money in their funds may pay a lower percentage for administration costs.

An SMSF provides you with greater levels of transparency, control and flexibility. Also, changes in laws governing SMSFs now allow them to borrow money. This allows you to invest in assets such as rental properties and other, more diverse assets.

What We Do

At Approved Financial Planners, we can educate you fully on SMSFs and help you determine whether an SMSF is right for you. If so, we can proceed to recommending one or more of our preferred administrators to work with you. Then, we help you set up your SMSF, taking care of such details as applying for the trust deed and the other documentation that is required.

We will help you determine a strategy. If you want to apply for loans such as residential, commercial or margin loans, we can help with that, too. We monitor your investments closely and communicate with you, your lawyers and accountants to help ensure your future.

Call Approved Financial Planners Today

The only way to really know if self managed superannuation funds are right for you is to call our Perth office: 08 6462 0888.