Australians warned about surprise tax bills as country’s $5 trillion wealth is passed down to next generation

It’s a legacy many of us hope to leave: a life-changing amount of money gifted to loved ones when we die. But who gets it and how much is gobbled up in fees and taxes can come down to some simple planning.

Over the next two decades, up to $5 trillion will change hands from one generation to the next.

WATCH THE VIDEO ABOVE: Australia’s $5 trillion wealth transfer tax trap

“We’ve seen intergenerational wealth transfer getting larger and larger for families,” Shadforth Financial Group Private Wealth Adviser Cameron Unicomb told 7NEWS.

“Because of that, there are actually more opportunities, but there are also far more risks.”

The average age to receive an inheritance in Australia is 50, meaning many beneficiaries are already retired or close to retirement when they get the windfall.

The looming tax burden has prompted more older Australians to pass on their wealth before they die.

“Older generations are now, more so, looking at how they can help their kids get a leg up earlier in life,” Josh Lee from Link Wealth said.

Gifting assets to loved ones can help maximise Centrelink entitlements and it can also reduce how much money is lost to tax.

“Most people are shocked to learn that there is a death tax,” Lee said.

Superannuation is taxed at a higher rate if it is not left to a dependent spouse or child.

“If that money goes to your adult kids and they are not financially dependent upon you when you are to pass away, they could be up for, worst-case, up to 30 per cent taxes,” Lee said.

If you’re aged between 60 to 75, you can do something about it. Lee helps clients withdraw their super and reinvest it to reduce their tax bills.

“It’s not a very easy system to navigate, particularly in retirement, and the way tax works can be quite confusing,” said Super Consumers Australia CEO Xavier O’Halloran.