Should you fully withdraw super prior to death to minimise tax payable by your beneficiaries?

Did you know that when you pass away and leave your super to your non-dependent children as a lump sum, they may be liable to pay tax on that super death benefit?

To save or minimise this tax liability, some people who have been diagnosed with a terminal illness decide to withdraw their super in full, just prior to their death and have it deposited into their personal bank account. 

At first glance, this may come across as a tax minimisation arrangement. Given the uncertainty around the timing of death, even with a terminal diagnosis, it can be difficult to plan for. But given many Australians die with a substantial amount left in their super account, it’s a strategy worth exploring if you find yourself in these difficult circumstances. 

If your estate, non-dependent children, or any other non-dependent beneficiaries ultimately inherit your super death benefit, then there are ways to minimise their tax liability and keep the Australian Taxation Office (ATO) onside.