For many, the goal is to keep their superannuation invested for as long as possible. 

And it’s easy to see why: the longer your super stays in the fund, the more time it has to grow, especially if your investment choices are performing well.

One of the most common questions people ask is: “Do I have to take my super out?”

The short answer? No.

There’s no rule that forces you to withdraw your super once you reach a certain age. 

While there are rules around when and how you can access your super (such as reaching preservation age or meeting a condition of release), there are very few that require you actually to withdraw it, unless you want to.

The only time your super must be paid out is after your death. And of course, by that time, it won’t be you receiving the money – it will be your nominated beneficiary or estate.

But that raises another important question: Should you leave your super untouched until you die?

That depends on who is receiving the money.

Super and Death Benefits: What Happens?

If your super is paid to your spouse, it’s generally tax-free and easy for them to access. You can leave your super in the fund for as long as you like, and a surviving spouse can even draw income from it as needed.

However, things change when your super is passed on to adult children.

Many couples name each other as beneficiaries, but after the surviving spouse passes away, the super often goes to adult children. And here’s the catch:

•  If your super is paid to a child over 25 (who doesn’t have a disability), they may have to pay up to 17% tax on the taxable component of your super.

That’s why it’s crucial to seek advice. In some cases, it may make more sense to start withdrawing your super during retirement and pay tax on the earnings yourself, rather than leaving it in the fund and passing the tax burden to your children down the track.

Why This Often Gets Missed

Many retirees in their 80s may not be earning enough to pay tax, and if they’re not seeking regular financial advice, they may not realise their children could face a tax bill on their super when they die. 

For example, if someone has $600,000 in super and passes away, their adult children could unnecessarily pay tens of thousands in tax.

The next generation may need to be part of the financial conversation. Helping elderly parents manage their super effectively can make a big difference in reducing the tax burden later on.

Planning Ahead: Reducing the Taxable Component

The good news? Some strategies can reduce the taxable component of your super, without withdrawing it and while keeping the funds in your name.

These strategies often become relevant during your 60s and are worth exploring with a professional adviser.

Superannuation death benefits tax can be avoided or reduced, but only with planning.

If you’re in your 60s – or helping your parents plan their finances – it’s a great time to seek professional advice and ensure your loved ones aren’t left with an unexpected tax bill.

If you’d like help understanding your superannuation position and how to manage it effectively, get in touch. A few smart decisions can make a big difference for your future, and your family’s.