Recent changes to superannuation rules mean that the requirement to satisfy the work test has been removed for individuals up to the age of 75. This means that those between the ages of 67 and 75 are no longer required to work for 40 hours over a 30-day period to be eligible to contribute to superannuation. 

Many of you who fall within this age bracket may have already contributed most of your personal assets to superannuation, and therefore may not consider this change to be relevant.

However, there may be an opportunity to save your future beneficiaries tens of thousands of dollars in tax. 

Although we do not have death duties in Australia, superannuation death benefits can be taxed at up to 17%, resulting in a substantial tax impost for beneficiaries. The level of tax paid by your beneficiaries will be dependent on the components within your superannuation fund. These components generally comprise a ‘taxable’ component and ‘tax-free component’. The taxable component consists of concessional contributions (employer and personal concessional) and investment earnings, while the tax-free component is generally non-concessional (after-tax) contributions.  

The components within your superannuation fund mean very little for retirees over the age of 60, given that all withdrawals from superannuation are tax free. Therefore, they only become relevant when an individual passes away. 

So, what can you do to save your beneficiaries tax? 

If you are over 60 and permanently retired there is an opportunity where you could make a tax-free withdrawal from your superannuation fund, and then re-contribute funds as a non-concessional contribution. This can reduce the taxable component within your superannuation balance and increase the tax-free component.  

Assuming your superannuation fund is made up entirely of taxable benefits, and you make use of the ‘bring forward’ rule, which enables you to contribute up to $330,000 to superannuation in a single financial year, there is a possibility you could save your beneficiaries up to $56,000 in tax. Further, this amount could be doubled in the case of a couple. 

Before considering the above it is essential that you consult with your Adviser. Everyone’s situation is different and there are specific details that need to be considered.