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.
.
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
More Articles
Tokenisation to change SMSF landscape
The tokenisation with regard to the ownership structure of conventional assets will have a profound impact on...
Super viewed as mortgage solution
A high number of people plan to use super to extinguish their mortgage as more people expect to retire still...
How to turn your annual SMSF investment strategy review into a genuine analytical exercise
Many SMSF trustees see the annual investment strategy review as a compliance obligation. Many SMS...
SMSF pension shortfall – when can trustees self-assess?
Few SMSF compliance issues create as much anxiety as discovering a minimum pension hasn’t been...
CSLR levy on SMSFs unfair
The Institute of Public Accountants has criticised the government’s intention to impose a levy on SMS...
Financial literacy in Australia: Where we’re improving (and falling behind)
How well do we understand our money? How well do we understand our money? Most of us make...
Five steps towards a more confident retirement
Small steps today could make a big difference to how you feel about retirement. Small steps today...
Check out the largest castles by country
Check out the largest fortresses by country. Only existing fortresses that stand today are...
Heathmont Financial Services Pty Ltd (ABN 68 106 250 104) trading as Heathmont Financial Services is a Corporate Authorised Representative (No. 262098) of Knox Wealth Management Pty Ltd (ABN 74 630 256 227), Australian Financial Services Licence Number (AFSL) 513763.
Julian McGoldrick is an Authorised Representative (No. 262098) of Knox Wealth Management Pty Ltd AFSL 513763.