Read the Fine Print

There are many factors to consider when selecting a superannuation fund:

Performance Record, Administration Fees, Investment Style and many More.  But there is one factor you possibly wouldn’t think about simply because you did not know it was there.

This ‘X’ factor could make a difference of tens of thousands of dollars to your family’s security, at no extra cost to you!  It’s a tax deduction called an anti-detriment payment that can be paid out if you die before moving into a superannuation pension phase. Your super fund does not have to pass this tax deduction on to your family even when the Australian Taxation Office (ATO) rules mean your spouse and children are entitled to it.

What is an anti-detriment payment and how does it work?

If any member of a superannuation fund dies before beginning an income stream in retirement and the member’s retirement savings are paid out as a lump sum, an anti-detriment payment is an additional lump sum
paid to eligible dependants as a refund of the 15 per cent contributions tax levied against the deceased member’s superannuation entitlements during their lifetime.

Consider the following case history. John, born in 1951, began contributing to a super fund in 1989 and died on 1 February 2010, aged 58. He has a superannuation lump-sum death benefit of $375,000. John is survived by his wife Janet, aged 53, who is the nominated beneficiary. The fund calculates an anti-detriment payment of $53,800 and includes this in the lump-sum death benefit. Therefore the lump sum paid to Janet will increase to $428,800 because of the tax on super contributions refunded as an anti-detriment benefit.

What can you do to maximise your family’s security?

The most important thing to remember is that although the anti-detriment payment is a tax concession allowed by the ATO, it is not written into the superannuation legislation. Some funds pay this additional
benefit automatically, and some don’t make these payments at all, even though the anti- detriment payment costs the fund manager nothing; it is simply passed to the fund as a tax credit by the ATO.

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