Monday, July 25, 2011

De facto death duty confirmation

As many will have seen, the lead article in Friday’s Financial Review confirmed that, as far as the Tax Office is concerned, payments made by a super fund, following the death of a member, will be subject to (at least) a 10% capital gains tax bill.

Tax is payable in these circumstances on the difference between the market value of the underlying assets of the fund and the cost base.

While some advisers have tried to adopt approaches to get around what is effectively a death duty, the conservative view as to the likely ATO approach has now been confirmed beyond doubt.

Depending on the exact circumstances of a client, there are still mechanisms to significantly reduce and/or eliminate the capital gains tax liability that might otherwise be triggered on the death of a fund member, however the announcement by the Tax Office further underlines the importance of ensuring a comprehensive, integrated and up-to-date estate plan.

For those interested in reading the full draft ruling, a link is set out below.

Until next week.