We may not like it, but we all understand that we have an obligation to contribute to the “greater good” in the form of tax. And, we all understand that we must pay tax to cover the costs of the things we collectively utilise, including bureaucracy, health, infrastructure and education, to name but a few uses of our tax dollars.

That’s all well and good, but it’s common sense that we all ensure that we only pay our fair share and no more.

It’s one thing to pay more tax than you should while you’re alive, but you’d be surprised how many of us unnecessarily impose this on our loved ones after we have “shuffled off this mortal coil”, as Hamlet would have said.

Have a look at your superannuation statement and it will show, amongst other information, the taxation components of your balance, being either “Tax Free” or “Taxed(Taxable)”.

In the event of your death, the amount in the second category is liable for taxation if paid to anyone other than your spouse or dependant children, and that tax could be as much as 22% of the balance.

What many people don’t realise is that, if they are over sixty years of age, this tax liability can quite possibly be eradicated, and relatively simply by what we financial advisers refer to as a “withdrawal and recontribution” strategy.

If you are sixty or older and have met a “condition of release”, you, usually have unrestricted tax-free access to the entire balance in your superannuation, even if you haven’t retired.

You are also entitled, subject to certain limits, to contribute to super. So, what this strategy entails is:

1.     Withdraw a lump sum from your super tax free;

2.     Subject to the aforementioned limits, make contributions back to your super as a Non-Concessional Contribution (NCC);

3.     These NCC will then become part of the “tax free” component of your superannuation.

Of course, it’s not quite as simple and straightforward as this brief explanation, and the penalties for getting it wrong can be significant.

However, if done correctly with professional guidance, it can significantly reduce the tax impost to your estate.

“What if I spend all my super before I die or leave it all to my surviving spouse?” you ask. Well, then all it has cost you is the time and expense of implementing the strategy.

However, if you, like many Australians, die with residual super funds left to your adult children, they will be eternally grateful………and will put on a much better wake for you!