Tax implications if super benefit is left to non-dependant

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When a person dies, in most cases their super provider pays their remaining super to their nominated beneficiary.

Super paid after a person’s death is called a ‘super death benefit’.

If the rules of your provider allow it, you can nominate the beneficiary for your super with your provider. This nomination may be non-binding or binding.

If a binding death benefit nomination is allowed, you can nominate one or more dependants or your legal personal representative to receive your super.

If a deceased person did not make a nomination, the trustee of the provider may:

– use their discretion to decide which dependant or dependants the death benefit is paid to
– make a payment to the deceased’s legal personal representative (executor of the deceased estate) for distribution according to the instructions in the deceased’s will.

If a non-binding nomination was made by the deceased, the trustee of the provider may:

– use their discretion to pay in accordance with the non-binding nomination
– make a payment to the deceased’s legal personal representative (executor of the deceased estate) for distribution according to the instructions in the deceased’s will.

If you’re a dependant of the deceased, the death benefit can be paid as either a lump sum or income stream. If you’re not a dependant of the deceased, the death benefit must be paid as a lump sum.

If you are not a dependant of the deceased
To work out how your super payment will be taxed, you need to know how much of the money in your super account is a:

– tax-free component
– taxable component the super provider has paid tax on (taxed element)
– taxable component the super provider has not paid tax on (untaxed element).

You don’t need to pay tax on the tax-free component of the death benefit, regardless of how you receive it, your age and the age of the deceased when they died.

If you’re not a dependant of the deceased and you receive a death benefit as a lump sum, the taxable component of the payment will be taxed at your marginal tax rate.

The amount of tax you must pay may be reduced by tax offsets.

Do you understand the tax laws relating to superannuation? What areas do you need explained?

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Written by Ben


Total Comments: 3
  1. 0

    How do I know which part of my super account is taxable? My Aussuper statement doesn’t have any information. If the taxable amount is relatively low, then there is probably no point doing anything. If it’s a large proportion, then maybe I need to look for solutions.

    • 0

      AusSuper should be able to advise the proportion of the components. I believe if they cannot do that then they are contravening superannuation regulations. Also would be great if you can advise of any possible or conceivable solutions that can be looked at ??

    • 0

      If you retired under the 54-11 rules it is most likely a large portion would be subject to tax if left to a non dependant (ie not your spouse,who would get your total benefit tax free !)Best option would be to discuss with your fund and if you are the last of the couple left standing cash out before you pass…..easier said than done depending on our end circumstances……………Good Luck



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