Self-managed superannuation fund (SMSF) trustees have been reminded of the significant tax deductions that can apply where a working member becomes permanently disabled or dies before age 65.
The reminder has come from Cavendish Superannuation head of education, David Busoli who said the so-called Future Service Benefit tax deduction was only available to SMSFs but was often neglected or poorly understood.
He said that, essentially, a SMSF with a working member who became permanently disabled or died before age 65 could be eligible for significant tax deductions.
“Typically, a 40-year-old with a $1 million balance, even if largely generated by life insurance proceeds, can create a fund tax deduction of around $600,000,” Busoli said. “Given that this deduction can be used to offset income and contribution taxes for other members – thus producing $90,000 in cash savings – it is an important benefit.”
However, he said that due to a lack of understanding of both its existence and application it was rarely applied.
