If subsequent to your death the benefits are paid to a “non-tax dependant”, such as an adult child or the executor of your estate, there is a taxable component of 17% (inclusive of the medicare levy) which is payable on the distributed amount.

Example:

A 75-year-old client suffered a relapse of a cancerous condition which had been in remission. As the medical prognosis was for a limited further life expectancy, he didn’t wish to undergo any further treatment. His wife had predeceased him and he had one adult non-dependent son and two infant grandchildren. Before he died we prepared a new Will for him which provided for a discretionary testamentary trust with his son and grandchildren as the primary beneficiaries as to the capital (referred to as a bloodline trust). His superannuation nomination was changed so that his superannuation member benefits were paid to his estate. Accordingly his benefits formed part of the bloodline trust subsequent his death resulting in enhanced asset protection and taxation benefits for his son and grandchildren.

When he contacted us, his self-managed superannuation fund (SMSF) had assets which consisted of cash on deposit, public company shares and a commercial property which had been his business premises, but which was rented to the subsequent business owner.

As he was in pension mode regarding the payment of his member benefits, his stock broker was instructed to transfer the public company shares from the SMSF into his name by way of an off market transfer. He also took the cash out of the SMSF bank account and put it into his personal bank account. The property was then transferred (also in specie) into his own name. None of these transactions incurred any capital gains tax (CGT) or, in the case of the transfer of the property, any Victorian Stamp Duty.

At the commencement of the exercise, the superannuation fund balance totaled $3,253,295.

Within this balance, the taxable component of his benefits was $923,919, resulting in a Future Death Benefit Tax (FDBT) liability of $138,588 if the benefit were paid to the Estate in accordance with his latest Binding Death Benefit Nomination. The difference in the taxable component was because the building held by the SMSF used to be his business premises which some years before he had transferred into the SMSF.

Prior to his death a total of $1,932,991 was taken out to deplete the taxable components, therefore minimizing the future taxable portion of the fund to $23,520, which lowered the potential FDBT from $138,588 to $3,528 achieving a net tax saving of $135,060.

On his death, the assets formerly held as part of his member benefits by the SMSF (the public company shares and the commercial premises) together with the sale proceeds of his residence and other personally held assets all became assets of the discretionary testamentary trust without incurring either CGT or Victorian Government stamp duty. Any future CGT incurred by the Trust would be on the increase in value of the assets from the time when they were transferred into his name, with a 50% discount on any gain which could be split between the beneficiaries of the discretionary testamentary trust.

If you are seeking Estate Planning advice concerning assets inside superannuation (or otherwise), contact our team today.

The post When should you take your superannuation benefits out of the fund? appeared first on Tony Kelly Lawyer & Estate Planner.

When it comes to estate planning, the smallest details can make a huge financial difference. A recent case handled by our boutique firm of wills and probate lawyers in Melbourne highlights how careful planning, timely action, and expert guidance can protect your loved ones from unnecessary taxes and maximise inheritance.

The Client’s Situation

Our client was 93 years old, with his wife pre-deceased, three adult daughters, and a significant asset portfolio. Having already transferred a substantial public company share portfolio out of his Self-Managed Superannuation Fund (SMSF) into his own name, the remaining major asset was an inner suburban warehouse valued at approximately $3 million.

At this stage, he was in palliative care following a heart attack and had expressed that he felt it was “time” to go. With such circumstances, there was an urgency to ensure his assets were structured efficiently to protect his family.

The Challenge

The warehouse property had not been transferred into his personal name because he had lost the title. He had been informed that replacing the title and transferring the property could be a lengthy process. Without timely action, the property could have remained “inside” the SMSF, which would have created significant tax consequences for his daughters upon his passing.

Had the property stayed in the SMSF, the Victorian Government Stamp Duty alone would have exceeded $300,000.

The Solution

We stepped in as his estate planning lawyers, replacing the title and transferring the property into his name efficiently and without delay. This proactive action saved the family $450,000 in taxes at just the 15% rate.

Shortly after the transfer, the client passed away. Thanks to the estate planning structures we had established, his daughters had multiple options for handling the warehouse:

• Retain the property as an asset within the discretionary testamentary trusts created in his Will.
• Sell the property capital gains tax-free and either take all or part of the sale proceeds or reinvest and distribute income to their children in a tax-efficient manner.

By comparison, if the funds had been invested through a standard discretionary “family” trust instead of one established via the Will, each child would have only a $500 tax-free threshold, with marginal rates up to 47% applied thereafter.

Key Takeaways

This case highlights why engaging an estate planning lawyer early is critical, particularly for clients with complex assets such as:

• Self-Managed Super Funds (SMSFs)
• Commercial or high-value property
• Public company share portfolios

Proactive estate planning allows families to:

• Avoid unnecessary tax liabilities
• Protect wealth for future generations
• Ensure assets are distributed according to the client’s wishes

Working with will and estate lawyers ensures your estate plan is carefully structured, legally sound, and tailored to your family’s needs.

Why Work With Our Wills and Probate Lawyers in Melbourne

Navigating the legal and tax implications of an estate can be complex. Our boutique firm provides guidance on:

• Estate planning and succession strategies
• SMSF asset transfers and tax minimisation
• Establishing testamentary discretionary trusts
• Updating Wills and binding death benefit nominations

By planning ahead, you can protect your assets, minimise tax exposure, and ensure your loved ones benefit exactly as you intend.

Take Action Today

Estate planning is about more than documents — it’s about safeguarding your family’s financial future. If you want personalised and bespoke guidance on how to structure your estate, speak to our estate planning lawyers today.

Contact Tony Kelly Lawyer now.

The post How Estate Planning Lawyers in Melbourne Saved a Family $450,000 appeared first on Tony Kelly Lawyer & Estate Planner.

The Australian Government has proposed significant changes to how superannuation earnings are taxed for individuals with substantial retirement savings. Known as Division 296, this measure is set to impose an additional 15% tax on earnings related to the portion of a person’s total superannuation balance (TSB) that exceeds $3 million. While legislation is still pending, the likelihood of implementation means now is the time to understand your position and begin preparing, particularly with the guidance of an experienced estate planning lawyer.

Why This Matters

For individuals with large super balances, particularly those managing their own funds through a Self-Managed Superannuation Fund (SMSF), the proposed changes could substantially affect future tax outcomes and wealth planning strategies. It’s essential to consider how these reforms may influence not just retirement savings, but also succession planning and estate distribution.

Early planning, ideally ahead of the anticipated start date of 1 July 2025, may reduce the risk of unwanted tax consequences. The first assessment year is expected to be the 2025–26 financial year, giving affected individuals a limited window to consider proactive steps.

Key Features of Division 296

Here’s a simplified breakdown of what’s proposed:

1. Tax Applies to Unrealised Gains

Unlike traditional capital gains tax, Division 296 may apply to unrealised investment gains, that is, paper profits that have not actually been converted into cash. This could lead to individuals paying tax on asset values that may later fall, raising equity and liquidity concerns.

2. No Backdated Refunds for Losses

If your super balance later dips below $3 million, you won’t receive a refund of previously paid Division 296 tax. Instead, any negative earnings will carry forward to offset future Division 296 liabilities, although there’s no guarantee these losses will be fully utilised.

3. How the Tax is Calculated

The calculation process involves:

• Assessing earnings based on your super balance change (adjusted for contributions and withdrawals),
• Identifying the proportion of earnings above the $3 million threshold,
• Applying a 15% tax rate on that portion.

This is assessed annually and applies to the individual, not the super fund.

4. Tax Payment Options

Although calculated at the individual level, taxpayers will have the choice to either:

• Pay the tax out of their own funds, or
• Request that the tax be released from their superannuation account.

This added flexibility may help with liquidity management, especially where assets are illiquid or investment-heavy.

Timing is Everything

While it may be tempting to act immediately—by selling down investments or withdrawing funds—doing so before the legislation is finalised could backfire. For instance:

• Selling assets early might result in capital gains tax without necessarily reducing your Division 296 liability.
• Withdrawing super prematurely could limit your ability to re-contribute, particularly if the proposed laws don’t pass as currently drafted.

Instead, this is the time to assess your total superannuation position, model potential scenarios, and consider whether any changes to your investment strategy, contribution plans, or estate planning structures are warranted.

Reassessing Superannuation as a Tax-Effective Strategy

Despite the introduction of an additional tax under Division 296, superannuation may still represent one of the most tax-efficient structures for retirement savings. However, individuals approaching or exceeding the $3 million threshold should take this opportunity to review their investment strategies and consider whether diversifying into other vehicles—such as family trusts or non-super investments—could help balance tax exposure and long-term goals.

Every situation is unique, so this type of review is best conducted with expert guidance.

Talk to an Estate Planning Lawyer About Your Superannuation Strategy

Division 296 could have long-term implications not only for your superannuation but also for your broader estate and retirement planning. Whether you’re managing an SMSF or simply seeking clarity about how the proposed changes could affect your legacy and wealth distribution, speaking with a qualified estate planning lawyer is a smart move.

At our firm, our team of will and estates lawyers in Melbourne can provide tailored advice to help you prepare for what’s ahead. From assessing your exposure to Division 296 to reviewing your estate plan in light of these proposed changes, we’re here to guide you every step of the way.

Reach out today to speak with one of our experienced estate planning lawyers and make informed decisions for your future.

The post How to Avoid Division 296 Tax Changes appeared first on Tony Kelly Lawyer & Estate Planner.

What are chattels?

To put it simply, ‘chattels’ refer to personal property or movable assets that are not land or real estate. In legal terms, chattels are tangible items that can be physically moved and transferred from one person to another, such as goods, furniture, or possessions. They are different from real property, which includes fixed assets, like land or buildings. Chattels also consist of items like jewellery, vehicles, art pieces, or family heirlooms.

The Administration and Probate Act 1958 (Vic) defines “personal chattels” as including:

“carriages horses stable furniture and effects (not used for business purposes) motor cars and accessories (not used for business purposes) garden effects domestic animals plate plated articles linen china glass books pictures prints furniture jewellery articles of household or personal use or ornament musical and scientific instruments and apparatus wines liquors and consumable stores but does not include any chattels used at the death of the intestate for business purposes nor money or securities for money”.

The main feature of chattels is how easily they can be transported, along with their clear difference from real property. The above definition also distinguishes chattels from items used in the conduct of a business. When a person passes away, the chattels they owned become part of their estate and must then be distributed in accordance to the terms of their Will or, in cases of intestacy, in accordance with the laws of succession.

Why is it essential to know the relevance of chattels?

Chattels possess great significance when an estate is being distributed after death, as they can have a substantial effect on the deceased person’s family and loved ones. An individual may normally leave directions as to how certain items are to be distributed, often to safeguard personal belongings, sentimental items, family heirlooms, or the like.

In situations of intestacy, Victorian law gives directions for distributing chattels to guarantee that personal property is justly dispensed according to the family relationships. Usually, chattels are given to the surviving spouse or children. This approach is taken to make sure that the personal items of the deceased person are passed on to those that were closest to them, or those who were most likely meant to inherit the items if there were a Will.

Cases addressing chattels

Numerous courts have had to identify whether specific items would constitute chattels. In the case of Smith v Smith (2012), a dispute arose over a family heirloom which held significant sentimental value. The heirloom, a painting, was categorised as a chattel but such characterisation was contested by the heirs. The Court held that despite its value and significance to the family, the painting was a chattel due to its mobility. A chattel is a moveable item that is not fixed to the property.

Other items that are much larger and less mobile may be more challenging to distinguish. McCauley v McCauley (2007) addresses this issue. This case concerned a dispute over whether certain fixtures and improvements on a property, being a pool and decking, should be considered as chattels or part of the real property. The court held that these items were not considered as chattels due to their permanent attachment to the land. It was highlighted that an item that is permanently fixed to the land or a building revokes itself from being considered a chattel. The pool and decking in this case were intended to stay in place as part of the property and therefore were considered as real property.

Bequeathing chattels to beneficiaries

It is essential to note that a testator (Willmaker) possesses the choice to bequeath specific chattels in their Will, such as the examples mentioned previously. Alternatively, the testator has the option to refer to a non-binding list that is kept separate to their Will, outlining the distribution of the items. Granted that the list is not legally binding, it does supply direction and guidance to the executor to aid in ensuring that chattels are distributed in accordance with the testator’s intentions.

In many cases, clients would bequeath chattels to a group of beneficiaries, like their children, in order for them to divide between themselves. While this approach works well when the beneficiaries can easily come to an agreement on how to divide them, it is still best for the testator to provide some general guidance in order to lessen the chance of possible disputes down the line. We recommend that testators include a specific procedure as to how chattels are to be divided in the instance that beneficiaries cannot come to an agreement, such as ‘drawing straws’ to determine the order in which beneficiaries can select chattels.

Testators may also consider whether a beneficiary’s portion of the residuary estate should be modified according to the value of the chattels they have inherited. To give an example, if one beneficiary receives an item more valuable than the other, the testator might choose to reduce their share of the residual estate to ensure the distribution among all the beneficiaries avoids any unintended inequalities.

Conclusion

The classification of property as chattels is crucial for determining how items will be distributed after someone’s death. Courts look into the nature of the property and the circumstances in question. Various aspects would be considered by the Court such as the item’s use, value, and relationship to the real estate. By understanding the importance of chattels and addressing them appropriately, legal practitioners can prevent potential disputes between family members.

The post What are ‘chattels’ and why are they important? appeared first on Tony Kelly Lawyer & Estate Planner.

At law, pets are considered a ‘chattel’, or an item of personal property. We know that pets are so much more than just an item, however. In this blog post, we set out your options for deciding what happens to your pets when you die.

Bequest in a Will

As a pet is a ‘chattel’ for the purposes of your Will, you can bequeath them to family or friends as you see fit. For beloved family pets, this could mean bequeathing your dog or cat to one of your children when you and your spouse have died.  You may also have a close friend or neighbour who is familiar with your pet and would be happy to take on their care if something happened to you. We recommend discussing such a bequest with the intended beneficiary first, to ensure they are willing to take on the responsibility. A beneficiary can always say no to a gift in a Will, and it is important to ensure that your pet is not left ‘high and dry’ in such circumstances.

A Trust for your pets?

You may have seen sensational headlines in the media, such as “Woman leaves $4.3 million fortune to her cats and dogs”. In Victoria, you cannot leave assets to an animal under your Will, as they are not a legal person who can inherit the property. You can, however, set up a Trust for the purposes of caring for your pets.

You would need to appoint a trusted person to be the Trustee of the Trust, such as a friend or relative. You may leave an amount on Trust for your pet based on your estimate of their expenses over their lifetime, such as food and vet bills. If you are intending to leave a large sum in Trust for your pet, it is important to think about who will receive any excess funds on their death. You may, for example, wish for any excess Trust funds to be donated to an animal charity.

If you have bequeathed your pet to a friend or relative, you may wish to consider making a bequest to such person elsewhere in your Will as a token of your appreciation. Such funds would not be directly for the use and benefit of your pet, but instead would be a gesture of thanks to the person who will care for them.

Memorandum of Wishes

We often recommend that clients make a Memorandum of Wishes to cover non-binding instructions or guidance which they wish to leave with their Will. This document can also include non-binding instructions as to the care of pets, for example:

• If my husband and I both die while our children are still under eighteen, we have appointed my sister as their Guardian. We would like our family cat Coco to stay with our children for emotional support.
• It is my wish that my dog Ringo is rehomed with a loving family. I would like my Executors to first ask if any of my children would like to take him, but if not, I would like him to go to a young family with a backyard.

Rehoming your pet

You may not have a suitable person in your life to help care for your pets on your death, but you still wish for them to be looked after. Several organisations offer programs where you can register your pet during your lifetime to be taken in by such organisation on your death.

One example is the RSPCA Home Ever After program. In this program, you register each of your pets with the RSPCA, including details of their medical conditions, likes and dislikes. You also make a direction in your Will that you give your pets to the RSPCA to rehome using the service. The RSPCA will then provide you with resources to ensure your Executors know what to do on your death. There is no cost for the service, but the RSPCA asks that you consider making a donation to the organisation in your Will as thanks.

Our furry friends (and feathered friends, and scaly friends) can be as much a part of our families as our human relatives. Even though they may be treated differently at law, you can still ensure that your Estate Plan provides the best possible future for your pets. Our team is on hand to update your Will, create a Memorandum of Wishes for you, or assist you in any way to give you peace of mind. Contact us today for a no-obligation discussion.

The post What happens to my pets when I die? appeared first on Tony Kelly Lawyer & Estate Planner.

A new case has expanded upon this decision. Re Rentis Pty Ltd [2023] QSC 252 focused on a deceased, Robert, who had appointed his wife and his brother as attorneys under a valid Enduring Power of Attorney. Importantly, his Enduring Power of Attorney gave his attorneys the express power to “renew any binding death benefit nomination” that he had made.

Robert lost decision-making capacity in 2020. His wife died in the following year.

Robert had previously made a BDBN allocating a portion of his superannuation death benefits to his wife. Following her death, Robert’s brother (acting as his attorney) updated Robert’s BDBN to divide his member death benefits between Robert’s children and Robert’s Estate.

The Court in Re Rentis considered whether such nomination was valid under the Attorney’s power to ‘renew’ a BDBN. On a strict interpretation of the word ‘renew’, such power could allow the attorney only to re-confirm an existing nomination in the same percentages, for example where a previous nomination had lapsed after three years.

The Court decided, however, that a narrow interpretation “would produce capricious, unreasonable and certainly inconvenient results”, and that such a power in an Enduring Power of Attorney should allow the Attorney to update the principal’s nomination when circumstances had changed (e.g. on the death of a beneficiary).

While such decision has not yet been tested in Victoria, we at Tony Kelly Lawyer & Estate Planner are pleased with this update. One issue of concern for us when assisting clients with their BDBNs is that many funds do not allow a ‘default’ or ‘two-tier’ nomination; that is, clients cannot dictate what should happen to their death benefits if their first choice of beneficiary predeceases them, and the client is unable to update their nomination due to incapacity or otherwise. Such a ‘default’ nomination is usually possible with a self-managed superannuation fund (SMSF) but our efforts to convince industry funds to adopt a two-tiered nomination form have so far been unfruitful.

Allowing a principal’s attorney to update the principal’s BDBN circumvents this issue, as the attorney can ensure a valid BDBN is still in place if the principal’s first choice of beneficiary has died and the principal no longer has capacity to update their own nomination. Above all, this decision underscores the need to have a robust and comprehensive Estate and Succession Plan in place that includes not only a Will and Binding Death Benefit Nomination but also Powers of Attorney.

If your Estate and Succession Plan does not include all of the above, we recommend that you contact us today to set up a no-obligation consultation.

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