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Superannuation guide for retirement planning

As the time comes for you to consider leaving the workforce, it is necessary to plan how to make the most of your superannuation in order to strengthen the chances of a financially secure retirement. Careful planning can significantly boost your super and make a big difference to your future lifestyle.

Identify your dependants and non-dependants:
When it comes to planning your retirement and how your super will be used, ensure that you have clear plans about what happens to your super benefits and other assets in the event of your death. Identifying who will receive your super benefits becomes more important if you plan to leave them to a non-dependant for tax purposes, such as financially independent adult children.

Combine your accounts:
Consolidating your super funds could possibly save you thousands of dollars in fees. Other benefits include reducing your paperwork and making it easier to keep track of your super. You could also end up with more superannuation than you realise, as research has found that if all super fund members were to consolidate their multiple accounts, the average Australian account balance would increase by 79%.

Do a financial stocktake:
Another important step when it comes to planning your retirement is to work out what kind of income you would like to have. By planning this ahead of time, you can then calculate how much money is needed to finance your preferred retirement income. This will help in working out how much super and other savings you currently have and estimate what you will have if you continue your current savings strategy.

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Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

Non-dependants must calculate how much money in the super account is a:

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).