1. Death Benefit Tax on Super
One of the most misunderstood areas is death benefit tax on superannuation. While super may be tax-free to a spouse, adult children who are not classified as dependants for tax purposes may pay up to 17% tax on the taxable component of inherited super. For families with substantial balances, this can represent hundreds of thousands of dollars lost unnecessarily. Strategic planning, including recontribution strategies and tax component management, can significantly reduce this exposure.
2. Transfer Balance Cap
The Transfer Balance Cap is another important consideration. Currently set at $2 million, it limits the amount that can be moved into the tax-free pension phase. Any excess remains in accumulation phase, where earnings are taxed at 15%. For high-net-worth individuals, careful timing and structuring of pension commencements are critical to maximise tax-free income.
3. Division 293 Tax
High-income earners must also be aware of Division 293 tax. Individuals earning above $250,000 per year have their concessional contributions taxed at 30% instead of 15%. Without proper forecasting, this can come as an unwelcome surprise.
4. Tax on Investment Income Outside Super
Tax does not disappear outside super either. Dividends, rental income, and interest earned in personal names are taxed at marginal rates of up to 47%. Comparing this with the concessional environment inside super highlights the importance of asset location and tax structuring.
5. Contribution Caps
Even contribution caps can create unintended tax consequences. Exceeding concessional caps results in excess contributions being taxed at marginal rates. This requires careful management, particularly in years involving bonuses, business income, or capital gains.
The good news is that these taxes are predictable and manageable with proper planning. Retirement tax strategy may involve recontribution strategies, spouse equalisation, structured withdrawals, estate planning alignment, and careful pension timing.
Growing wealth is important, but protecting it from unnecessary tax leakage is equally critical. Effective retirement planning is not just about investment returns — it is about after-tax outcomes and long-term sustainability.
Disclaimer: This information is general in nature and does not consider your personal objectives, financial situation or needs. You should consider seeking professional advice before making any financial decisions. Past performance is not a reliable indicator of future performance.
