Tax implications of superannuation death benefits paid to dependants

Are you?
– A dependant of a super fund member?

At a glance:
– The tax treatment on superannuation (super) death benefit payments will depend on who the benefit is paid to.

You should:
– Ensure you treat superannuation death benefit payments correctly.
– Contact us if you require any clarification or advice.

Dependants of the deceased are not required to pay tax on any component of a super death benefit if they receive it as a lump sum. This also means the payments are not required to be disclosed in the dependants income tax return.

If taxpayers receive lump sum super death benefits from a member of the Australian Defence Force or police force who died in the line of duty, the benefits are taxed as if they were their dependants even if they are non-dependants.

Dependants are not required to pay tax on the taxable component (taxed element) of a death benefit received as an income stream if:

• They are more than 60 years old; or
• The deceased is more than 60 years old.

Dependants pay tax at marginal tax rates less a 15% tax offset on the taxable component (taxed element) of a death benefit received as an income stream if:

• They are under 60 years old; and
• The deceased is under 60 years old.

If dependants are under 25 years old and started receiving a death benefit as an income stream after 1 July 2007:

• They must stop the income stream and take the remaining benefit as a lump sum on or before the date they turn 25; and
• The lump sum is tax free.

Remember:
– Dependants and non-dependants will pay tax at different rates on super death benefit payments.