Will my kids have to pay a ‘death tax’ on my super?
I heard that because my super beneficiary is my legal personal representative (according to my will, i.e. my two adult children), they will be charged a 32 percent “death tax” because they are over 18 and not financially dependent on me.
Is it true that there will be no “death tax” if I transfer the money to my bank account before my death?
Regarding the first part of your questions, the death benefit tax is 15 percent plus Medicare on the taxable portion of your retirement benefit, which is not the entire balance for most people. Therefore the effective rate of tax paid is usually less than this. Whether the pension passes directly to your children or reaches them through a will should not change anything.
You are correct to point out that this death benefit tax can be avoided by withdrawing your retirement savings before your death. The challenge here is timing. You don’t want to withdraw too early and have your savings earn a paltry return in the bank and potentially be subject to income taxes.
You should discuss your arrangements with your lawyer.
I’m confused about the ATO’s six-year rule on capital gains tax (CGT). I purchased a unit that became my home in April 2021. I moved in January 2025 and this unit has been rented out ever since. Will there be CGT?
Thanks for your question. This rule can create confusion. In Australia, our home is exempt from capital gains tax. The six-year rule exists to allow for situations where a person leaves home temporarily, for example for interstate or overseas work, but intends to return in the future.
Attention, there is no obligation to return. Although the property can be rented in their absence, the capital gains tax main residence exemption continues for up to six years, provided the person does not acquire another main residence. This last part is key. You can only have one principal residence at any given point.
So the answer to your question depends on what happens when you move in 2025. Did you buy another house? If so, it is now your principal residence and the unit will be subject to capital gains tax. But if you’ve been renting since then, the six-year rule may actually apply.
Since this is a tax matter, you should confirm your situation with your accountant.
I am 37 years old and am planning to buy a property in Sydney after inheriting it from Ireland. Will I pay tax on this in Australia? After paying off some debt, I will have about $130,000 left; Should I donate some to a retirement fund or use it all as a property deposit ($750,000 – $900,000 with a mortgage)?
There is no tax on inheritances in Australia, so you are all clear on this one.
My inclination would be to use all funds to assist with the home purchase. Having more available here can eliminate the need for lender insurance (which is a cost you incur) and increase the interest rate you can access.
Historically, residential property values have increased over time; so assuming this continues, you are improving your ability to acquire an asset that increases in value and is exempt from capital gains tax.
Later in life, if you haven’t saved enough retirement funds to meet your needs, you can access the equity in your home through either downsizing or a reverse mortgage.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. Questions: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
