When most people think about superannuation, they see it as their retirement nest egg. What many don’t realise is that super can also become one of the biggest tax traps for their family when they pass away.
The Hidden Tax on Super
If superannuation is paid to adult children, the taxable component is usually hit with a 17% tax bill (15% plus Medicare levy).
For many Australians, this means tens of thousands of dollars — sometimes hundreds of thousands — disappearing to the tax office instead of staying in the family.
A Real Example
One of our clients wanted their super to pass to their adult children. If they did nothing, the estate would have faced a tax bill of more than $50,000.
We worked closely with them to put a re-contribution strategy in place.
What’s a Re-contribution Strategy?
A re-contribution strategy involves withdrawing money from your super and putting it back in as a non-concessional contribution. Done correctly, this can convert taxable super into tax-free super, reducing or even eliminating the tax your beneficiaries might otherwise pay.
It sounds simple, but there are important rules to follow around contribution caps, age limits, and fund requirements. It’s not suitable for everyone — which is why it’s critical to get advice before acting.
The Result
For this client, the outcome was clear:
- More than $50,000 in tax savings
- Peace of mind knowing their kids will benefit fully from the wealth they’ve worked hard to build
Why It Matters
Superannuation rules are complex, and small decisions can have big financial consequences. Strategies like re-contribution can be powerful, but they must be tailored carefully to each person’s situation.
That’s where professional advice makes the difference.
Protecting Your Family’s Legacy
Your super isn’t just about your retirement. It’s about what happens after, too. With the right planning, you can protect your wealth, reduce unnecessary tax, and make sure more of your money goes to the people you love — not the ATO.
👉 If you’d like to explore how strategies like this could benefit your family, book a discovery call.
