17 Oct October Super Matters Newsletter

Superannuation Death Benefits

Your superannuation benefits can be dealt with either through your Will or by nominating a death benefit beneficiary at any time before your death. If you wish to have your superannuation benefits dealt with under the terms of your Will you must make a death benefit nomination which nominates your Legal Personal Representative or Your Estate as the beneficiary. You must check your superannuation trust deed for your SMSF to ensure you use the correct wording to achieve this result.

Who can be a beneficiary of my superannuation benefits?

1. Spouse,
2. Former spouse,
3. Children,
4. Person with whom a member had an interdependent relationship with prior to their death, and
5. The Estate of the member.

Many people try to nominate a sibling or a parent as a beneficiary. As a general rule, these people are not eligible as beneficiaries unless they are financially dependent upon you.

Taxation of death benefits:

How your superannuation benefits are taxed upon your death depends firstly upon whether they comprise concessional contributions or a non-concessional component. And secondly, whether the benefits are received as a lump sum or as an income stream.

The following is a summary of the tax treatment.

• A Lump sum is tax free if paid to a death benefit dependent, such as a spouse or a child aged less than 18 years,
• The tax treatment of an income stream if paid to a death benefit dependent depends upon the age of the beneficiary and/or deceased at their time of death;
• If the deceased is aged over 60 at the time of death then the income payments will be tax free if passed to death benefit dependent,
• If deceased is aged less than age 60 at death then the tax treatment depends upon the age of the recipient, so that if the recipient is aged over 60 then it is tax free but if recipient is aged less than 60 the benefit is taxable but with a 15% rebate.

Death benefit nominations

The following information relates specifically to SMSFs. There are three types of death benefit nominations.

1. Non-binding nominations,
2. Binding nominations and
3. Non-lapsing nominations.

Binding and non-lapsing nominations are specific instructions that you can give to the surviving trustee of your SMSF, which must be followed upon your death. A non binding nomination is simply your wish that you ask the surviving trustee to follow, but they are not bound to follow those instructions.

However, a word of warning. Recently there has been a number of Court cases where supposed “ binding death benefit nominations” were found not to be valid as the wording of the nomination did not follow the wording as set out in the SMSF trust deed.

As such, you should seek legal advice to ensure that your binding nomination does in fact comply with the wording of your super fund deed. A mistake with the wording could be very costly for your family in legal fees to take Court action to correct your mistake. This is an area where you should seek expert legal advice if you have an SMSF.

Volatility in the Stock Market

The last couple of weeks have seen incredibly high levels of volatility in global stock markets. Following concerns about China’s stock market, last Monday, which was dubbed “Black Monday”, saw havoc across all markets. The US market fell 3.7%, London lost 5.4% and the ASX200 fell 4.1%. These levels of volatility haven’t been seen since the GFC, and sparked concerns about a more dramatic slump across global equity markets. However, in true volatile fashion, most markets finished the week level, if not higher than, where they started on Monday morning. A lot of stress and excitement for no gain or loss – but that doesn’t mean that it was without reason. The fears that sparked the volatility primarily relate to the economic viability and strength of China’s economy. As smart and informed investors, it’s critical that we consider these risks when we invest our money.

The Australian Stock Market has fallen some 4.6% over the last 12 months, and is currently 23% below the high it reached just prior to the Global Financial Crisis. This means that some of our most notable blue chip stocks – companies like National Australia Bank and Rio Tinto – are currently trading at levels that are dramatically below their historical highs. However, given the incredible levels of volatility we’ve witnessed, buying stocks is obviously a scary (and potentially costly) operation.

But as you know, there is a safer way to invest. The JB Way is a low-risk stock market strategy that enables investors to expose themselves to all the upside potential of the stock market (and specific stocks) without risking their investment capital. In the modern market (equipped with its high levels of volatility and risk), this strategy is more relevant now than ever before. When implemented across a portfolio, The JB Way can reduce your total risk (i.e. the amount of your capital that you’re liable to lose) to just 4-5%, whilst you maintain exposure to all upside potential associated with the equity market as an investment class.

If you are interested in The JB Way as a strategy, tune into our webinar tonight, as we will be covering conditions in the stock market, our current recommendations, how to implement The JB Way to effectively hedge your risk, and also, an exciting new investment opportunity.

Tonight’s Webinar

We are passionate about providing ongoing education, and it is one of the key benefits that set us ahead of our competitors. Our webinars are just one of the useful tools through which you can further your knowledge about the investment, management and compliance aspects of your SMSF.

Register below to secure your spot.

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Get To Know The SMSF Club Staff

Happy investing,

Justin Beeton & The SMSF Club Team
E: admin@thesmsfclub.com.au
P: 1300 760 397
W: www.thesmsfclub.com.au