Each year when completing your accounts PJT completes a review of each client’s changing circumstances to ensure we continue to look after your best interests. This extends beyond just your financial statements and income returns to your Wills, Power of Attorneys, Binding Death Benefit Nominations, Insurances, etc.

PJT recently completed the accounts for one of our retired clients that administers a self-managed super fund (SMSF). A brief background for this client was as follows:

  • Both members of the super fund had recently (within the last 12 months) turned 60
  • Their combined superannuation entitlements came out at just over $1 million
  • The clients were already retired from the workforce. This is important to note as it meant that a ‘condition of release’ had already been satisfied
  • The majority of the Super entitlements were in the husband’s name only
  • 100% of the members’ entitlements consisted of ‘taxable’ components

As the members of the fund were both over 60 years of age, the fact that 100% of their super balances consisted of ‘taxable’ components had no impact on them when they drew their pensions. This is because under current legislation any benefits from super are tax free once a member turns 60.

However, after reviewing the client’s situation it was ascertained that it was their intention that on their passing their super entitlements would flow to their two adult children. As the children are both financially independent, the fact that our client’s benefits were 100% ‘taxable’ component would give rise to a significant tax bill upon receipt of their inheritances.

To put it in dollar terms, if no changes were made the ATO could have taken more than $170k in taxes upon payment of the inheritances to the children.

With PJT’s assistance the fund has now been converted to 100% tax free, and as a side note, the entitlements have also been rebalanced between the husband and wife. Now no tax is payable on their hard earned Super upon their passing and the children are left with the maximum inheritance possible.

If you’ve recently turned 60, or are close to – it’s imperative you review your Super arrangements with your PJT Superannuation Advisor to ensure your fund is correctly set up to ensure your beneficiaries entitlements are protected.

Please note, the strategy implemented in this case may not be applied if you are over the age of 65, as your ability to then contribute money back to super becomes very limited. As such, if you are approaching 65, or have celebrated your 65th birthday after 1 July 2014 contact PJT immediately for a review of your options. Any delays could result in your benefits being locked up as taxable components.

For a no obligation discussion, contact your advisor at PJT today.


GENERAL ADVICE WARNING: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

Merit Wealth LogoPJT Accountants & Business Advisors Pty Ltd  CAR Number 1243046 ABN 75 116 182 873  is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361

Jodie Thompson  ARN 277884, Wayne Patten ARN 277883, Matthew Dunn ARN 1243039 are Limited Authorised Representatives of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361

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