Calls for No More Loophole on “Super Inheritance”

Legal experts have called for the Australian Government to scrap a loophole that allows the wealthy to pass superannuation to their children as a tax-free inheritance.

A system in Australia allows the wealthiest to withdraw their balance and resubmit the funds to ensure that their children pay the minimum amount of tax possible. The current rules allow any adult who receives a superannuation benefit from their parent having to pay just 15% tax on any contribution that has not been taxed.

Calls to Scrap Superannuation and Inheritance

However, the chief executive of the Association of Superannuation Funds of Australia (ASFA) has called on the Government to scrap the loophole that allows such transactions to occur with the chief executive stating that superannuation was not intended for inheritances.

Pauline Vamos stated that the government should introduce a cap on any superannuation funds to $2.5 million. In a statement she said: “Accumulation of excessive wealth for estate planning ­purposes is not the purpose of the superannuation system.

“In the ideal case, superannuation should provide flexible income streams and access to capital throughout retirement, but the level of income should be such that, by death, an ­individual’s superannuation balance is zero or as close to zero as is practicable.’’

Currently, 70,000 Australians currently have a superannuation balance in excess of $2.5 million with many intending such balances to be passed on as an inheritance. A total of 475 people in the pension phase of their retirement have balances of $10 million or more.

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The best way to ensure that you have left a legal inheritance for your loved ones is to create a legally binding Will using a solicitor. Such a document can be difficult to challenge, especially with a solicitor having notes and records to back up your last wishes.

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