The dual pension strategy is an innovative approach to reducing the super death benefits tax for non-dependants. It involves the establishment of two pension accounts and the transfer of death benefits between them. This strategy involves setting up two pensions: one for the member and one for their spouse or partner.
This approach involves splitting your superannuation savings into two separate accounts, one for you and one for your spouse, to take advantage of tax-free pension payments and reduce the tax burden on your estate.
A dual pension strategy is a tax-effective way to reduce the amount of super death benefit tax payable by non-dependants. It effectively reduces the super death benefit tax payable by non-dependants, as the spouse or partner is considered a dependant for tax purposes.
The first type of dual pension strategy is the reversionary pension, which allows the spouse to continue receiving pension payments after the member’s death.
The second type is the non-reversionary pension, which provides a lump sum payment to the spouse upon the member’s death. Both strategies can help reduce the tax payable by non-dependants, as they allow for a more gradual and tax-effective distribution of the super benefits. It is an effective strategy to help non-dependant beneficiaries reduce the Superannuation death benefits tax.
However, weigh the advantages and disadvantages of a dual pension strategy before making any decisions. A dual pension strategy is for SMSF members who want to reduce their super death benefit tax and provide for their loved ones tax-effectively.
In Australia, the super death benefits tax, also known as the “death benefits tax” can apply to the superannuation benefits paid to non-dependant beneficiaries (such as financially independent adult children). Here are some strategies that individuals often use to minimize the super death benefits tax for non-dependants:
Superannuation benefits are divided into taxable and tax-free components. The tax-free component is personal contributions for which there is no tax deduction. When these components are paid to non-dependants, they are tax-free.
Making a binding death benefit nomination ensures that the superannuation fund trustee distributes the benefits according to your wishes. It can prevent the benefits from being paid to non-tax dependents unnecessarily.
If you have life insurance within your super fund, the proceeds could be directed to pay off debts, leaving more of the super benefit to inheritors. SMSF Services include fund setup, tax and accounting support, investment advisory, compliance assistance, and ongoing administration support.
Superannuation laws and taxation rules can change. Regularly review your beneficiary nominations and estate planning arrangements to ensure they remain effective under the current laws.
In summary, a dual pension strategy is effective with super death benefits tax for non-dependants. The non-dependant beneficiaries can receive their inheritance with a lower tax rate by splitting the super balance into two accounts, a tax-free pension account and a taxable lump sum account. It’s helpful for adult kids and other non-dependent people with higher tax rates. An expert SMSF specialist advisor works with self-managed superannuation funds (SMSFs) and provides expert advice and guidance on managing these funds.
But it’s important to remember that not everyone can benefit from a dual pension, so it’s essential to plan carefully.