What's the difference? Superannuation vs Discretionary Trusts

TL;DR

Superannuation and family discretionary trusts are different tax structures with their own benefits, and using them together can provide greater flexibility and estate planning advantages.

Transcript

g'day and welcome to this week's video my name is robert gowdy and this week we're going to discuss the topic of comparing superannuation to family discretionary trusts now this question comes from one of our youtube subscribers and really it was really after i suppose a comparison between the two i think from the outset what we need to confirm is ... Read More

Key Insights

• 🚕 Superannuation is a tax structure with concessional tax rates for contributions and earnings, providing incentives for retirement savings.
• 🥹 Family discretionary trusts are entities that hold assets and distribute income to beneficiaries, allowing for wider distribution and potential tax benefits.
• 🚕 Using both superannuation and discretionary trusts can provide individuals with greater flexibility in distributing income and maximizing tax advantages.
• 📼 Discretionary trusts can be useful for individuals with significant other assets after maximizing their superannuation contributions.
• 🪡 Discretionary trusts offer estate planning advantages as assets do not need to be paid out upon the death of a member and can continue through generations.
• 🥶 Superannuation allows for tax-free pensions and tax-free earnings on funds in the accumulation phase.

Questions & Answers

Q: What is the main difference between superannuation and family discretionary trusts?

Superannuation is a tax structure with a maximum tax rate of 15% and provides concessions for contributions and earnings. Family discretionary trusts, on the other hand, do not pay tax themselves but distribute income to beneficiaries who pay tax based on their marginal tax rates.

Q: Why would someone use a family discretionary trust in conjunction with superannuation?

A discretionary trust is useful when individuals have maxed out their super contributions and still have substantial other assets. It allows for wider distribution of income to multiple beneficiaries and can be a valuable estate planning tool.

Q: What are the benefits of using superannuation as a couple?

As individuals, each person can have up to $1.7 million in superannuation, and once retired and over the age of 60, any money in pension mode is taxed at zero. The pensions paid out and the earnings within the fund are tax-free, providing significant tax advantages.

Q: What are the advantages of a family discretionary trust over superannuation?

Unlike superannuation, assets within a family discretionary trust do not need to be paid out upon the death of a member and can continue for generations. There are also no limits on the amount of money that can be placed in a discretionary trust, unlike superannuation, which has contribution limits.

Summary & Key Takeaways

• Superannuation is a tax structure with a maximum tax rate of 15% and provides tax concessions for contributions and earnings.

• Family discretionary trusts are entities that hold assets but do not pay tax, with income and capital gains distributed to beneficiaries who pay tax based on their marginal tax rates.

• Using both superannuation and discretionary trusts can be beneficial for individuals who have maxed out their super contributions and have significant other assets, allowing for wider distribution and estate planning advantages.