Div 296 sparking death benefit discussions
The Division 296 impost has prompted SMSF members looking at retaining assets in super to consider the tax impact of their death on their beneficiaries.
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More SMSF members are looking at the effect of death benefit taxes on their beneficiaries as part of their consideration around whether to move assets out of superannuation to avoid the impact of the proposed Division 296 impost, according to administration provider Heffron.
Heffron managing director Meg Heffron said recent discussions with clients on the Division 296 tax had expanded to include issues such as where to move assets outside of super and estate planning.
“One of the most useful things about Division 296 tax being threatened, even if it’s never introduced, is it’s really focused the mind of a lot of people who have kept money in super because it’s a good tax deal and don’t want to take it out, and the government doesn’t make them take it out anymore,” Heffron said during a recent practitioner briefing.
“What they’re doing is running the gauntlet on death benefit taxes.
“A lot of the conversations I’ve been having with clients about this has been: ‘If I have this tax, which doesn’t necessarily make me worse off in super than outside super, and with that money over $3 million I don’t mind taking it out of super because at least I’m protecting my beneficiaries from that death benefit tax.’”
She said the issue of death benefit taxes arises because if a member moves assets out of superannuation, they are dealt with by the will, but where they are retained in super, they can have an impact on those receiving a death benefit from the fund.
“One of the things that has the biggest detrimental impact on wealth is dying with a whole heap of money in super and no spouse to leave it to,” she said.
“Usually, if there’s no spouse, it’ll end up with adult children or other beneficiaries that are not dependants and they pay very high rates of tax on most death benefits and that will end up dwarfing any Division 296 tax.
“I think in the end, we’ll end up having a very productive discussion about death benefit taxes prompted by something completely different, which is Division 296.”
June 26, 2025
Jason Spits
smsmagazine.com.au
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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.
Financial Advice Sydney and the North Shore Office based in Lindfield NSW