I and my two sisters (all non-dependents for tax purposes) can be paid our fathers Super death benefit of $300K either directly as beneficiaries, or into the Estate. Of the $300K ~$105K is the taxed element, there is no un-taxed element, and the other $195K is tax free.
If we receive it as beneficiaries the Super fund takes 15% tax + 2% Medicare levy, and the ATO will credit us for this amount. But I am confused around how the payment then affects your taxable income. Say I earn $75K per year and would normally pay $13,288 on that in tax. If I receive the payout, I will receive $105,000 less 17% / 3 = $87,150 / 3 = $29,050 as the taxed element. The other $195K / 3 = $65K will be tax free.
So, I will have to declare the $29,050 as part of my taxable income, raising that from $75,000 to $104,500. On that income you would pay $22,138 in tax versus $13,288 on $75K, which is an $8,850 increase in the tax bill. Now the credit from the ATO for the amount on $35K the Super fund withheld would be $35,000 x 17% = $5,950.
So, does that mean that I will have to pay an extra $8,850 - $5,950 = $2,900 in tax?
Also, will I have to pay a higher Medicare levy as my taxable income has gone from $75K to $104.5K?
However, this may be worth the extra personal tax burden as the Estate has $200K in CGT from share sales. So, if the Super Death Benefit gets paid to the Estate, will the $105K taxable element need to be added to the $200K in share CGT to give an assessable income of $305K?
Won’t this mean the Estate would pay a lot more tax due to being in a higher marginal tax bracket than if we dilute the taxable element if we take it as beneficiaries?
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