Estate Planning in focus as $3M super tax looms

Experts urge high-balance super members to act or risk unintended tax outcomes

With the proposed Division 296 tax on superannuation balances exceeding $3 million set to take effect, self-managed super fund (SMSF) members retaining high balances are being urged to revisit their estate and succession plans without delay.

According to Australia’s SMS Magazine, the impact of the new tax won’t just be felt during life — it may also significantly affect the distribution of super benefits upon death. Members who opt to retain large balances inside super despite the new tax measures must prepare for a wide range of estate planning and succession scenarios.

Key points:

• SMSF members with high balances need timely estate and trustee succession planning, including binding death benefit nominations, enduring powers of attorney and successor director appointments.

• With Division 296 potentially affecting death benefits, it’s essential to ensure super funds can be accessed in a timely, tax-effective manner before a member’s death.

• Particular care is required in couples with large individual super balances to avoid triggering Division 296 liabilities when benefits pass to a surviving spouse.

• Mistakes in how income streams are created post-death may lead to tainting issues that compromise the tax-free treatment of superannuation benefits.

The article notes the importance of having all documentation — wills, powers of attorney, SMSF deeds and nominations — current and accessible. Without these, delays in accessing super post-death could result in unnecessary taxation that may otherwise have been avoided.

Holding a large super balance?

Review your estate planning now to avoid future tax headaches. Ask to speak with Collins Hume's knowledgeable superannuation advisers to prepare for Division 296.