Plan 2 Prosper

The bad news part of this story is that it only applies to you if you have been diagnosed with a terminal illness. The good news twist is that Superannuation members with a terminal illness will now be able to draw super tax free. It will be important to check if the Trustee of your superannuation fund has been able to implement these announcements and work through some of the other fine details which need to be considered.

The Minister for Revenue and Assistant Treasurer, Peter Dutton, recently announced that the Government would exempt people with a terminal illness who access their superannuation under the age of 60 from the tax on their lump sum benefit.

Individuals under the age of 55 who access a lump sum superannuation benefit from a taxed superannuation fund are currently subject to a maximum tax rate of 20 per cent (plus the Medicare levy). This tax is generally withheld by the superannuation fund when it makes the lump sum payment.

While the actual tax payable may be lower as it depends on the individual’s marginal tax rates, any refund they may be entitled to would not be determined until the end of the financial year.

Until the legislation passes into law, the Government has asked the Commissioner of Taxation to consider changing the rate at which superannuation funds are required to withhold from payments to people in these situations.

Amendments to the legislation will have effect for payments received after today.

Further details will be determined in consultation with the superannuation industry, the medical profession and support groups.

Reference: Treasury Press Release No. 111, 11 September 2007, ‘Australians With Terminal Illness Will Be Able To Draw Super Tax Free’.

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