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18 Jul 2016

Superannuation: Boomerang Children

A question that we often get asked is in relation to adult child and whether an interdependency exists if they are living with their parents.

That is very difficult to get right and we recommend you seek legal advice.

The benefit is that if an interdependency does exist then there is no 15% tax plus 2% Medicare to be paid on the taxed component (or 30% tax plus 2% Medicare on the untaxed component from the life insurance payout) of the superannuation death benefit.

For example, on a $500,000 superannuation death benefit that could be the difference between paying $85,000 to $160,000 in lump sum tax versus NIL if there is a interdependency relationship.

In a recent test case with the Administrative Appeals Tribunal (AAT), the son died and the AAT agreed with the Australian Tax Office and found that an arrangement of commercial convenience does not prove a mutual commitment to a shared life which is needed to evidence an interdependency relationship.


At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.

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