Australia is on the cusp of the largest wealth transfer in its history, with an estimated $3.5 trillion in assets expected to be passed down from older generations by 20501.
Adviser and client
Inheritance is just one of many financial transitions your employees may face during their careers. As employers, you play a vital role in supporting your workforce through these moments which impacts their wellbeing, productivity, and long-term planning.
Why employers should pay attention
Financial transitions, whether inheritance, redundancy, divorce, or other major life events can present both opportunities and challenges for employees. These changes may prompt questions for your team about career direction, working hours, or retirement planning.
Employers who recognise these moments and offer resources to help employees navigate them, simultaneously presents an opportunity to build stronger engagement and productivity.
Here are some key thigns for employers to consider:
Promoting financial literacy and wellbeing programs: Equip your team with the knowledge to make informed decisions during times of change.
Offering access to financial advice through workplace partnerships: Provide opportunities for employees to seek professional guidance, whether about superannuation, investments, or managing debt.
- Encouraging use of superannuation contributions and debt reduction strategies: Help employees understand how to make the most of their financial situation, whatever the transition.
Workforce impacts
Major financial changes can trigger a range of responses, from impulsive spending to anxiety about financial decisions. These reactions may affect workplace performance, especially if employees are navigating complex financial, legal, or emotional issues.
Tax, superannuation and retirement considerations
Financial transitions such as receiving an inheritance, a redundancy payout, or a significant windfall can have important tax, superannuation, and retirement implications. As an employer, you can help your employees by providing access to clear information and professional advice, so they can make informed decisions and avoid costly mistakes.
1. Cash Windfalls (Including Inheritances)
- Tax: In Australia, most cash inheritances and gifts are not subject to income tax. However, any income earned from investing that money (such as interest, dividends, or rental income) will be taxable.
- Superannuation: Employees may wish to consider contributing some or all of a windfall to their superannuation. This can boost retirement savings and may offer tax advantages, but contribution caps and eligibility rules apply.
- Employer Support: Provide access to financial education or advice on how to make the most of a windfall, including the benefits and limits of super contributions.
2. Property or Asset Transfers
- Tax: Inherited property is generally not taxed at the time of inheritance, but capital gains tax (CGT) may apply if the property is later sold. The rules can be complex, especially if the property was the deceased’s main residence or has been held for a long time.
- Superannuation: Employees may want to seek advice on whether to sell, keep, or transfer assets, and how this could affect their super or retirement plans.
- Employer Support: Offer webinars or resources on CGT basics, and connect employees with financial planners who understand property and inheritance issues.
3. Changes in Financial Circumstances and Age Pension Eligibility
- Centrelink Notification: If an employee receives a significant inheritance or windfall, it may affect their (or their partner’s) eligibility for government benefits, such as the Age Pension. Employees must notify Centrelink within 14 days of any change in their financial situation, as it may impact income and asset tests.
- Retirement Planning: A sudden increase in assets could change an employee’s retirement timeline, superannuation strategy, or eligibility for government support.
- Employer Support: Remind employees of their obligations to Centrelink and provide access to retirement planning resources or advice.
How Aware Super can help
1. Financial wellbeing webinars
Regular sessions on tax, superannuation, and retirement planning, tailored to life’s big financial transitions.
Register for Aware Super webinars
2. Access to financial advice
Employees can book no-cost, obligation-free appointments with Aware Super financial planners for guidance on super, tax, and retirement strategies.[AD1]
3. Online resources
Up-to-date guides and tools on topics like inheritance tax, super contributions, and Centrelink rules.
Where to next
[AD1] Advice provided by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL 238430), wholly owned by Aware Super.
1 https://www.pc.gov.au/research/completed/wealth-transfers/wealth-transfers.pdf