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When a person dies, their super balance is usually paid to their nominated beneficiary. This is called a ‘super death benefit’. Superannuation benefits are typically made up of two components: tax-free and taxable (which may come from a taxed or untaxed source).
The tax-free component includes:
- After-tax contributions
- Government co-contributions.
The taxable (taxed) component consists of:
- Employer contributions
- Salary sacrificed contributions
- Personal contributions where a tax deduction was claimed.
The taxable (untaxed) component only applies to super from an untaxed source, such as a public sector defined benefit super fund for government employees.
Super death benefits tax
The amount of tax a beneficiary pays is determined by:
- The super component
- Whether they are a dependant for tax purposes
- Whether the super is taken as a lump sum or an income stream (non-dependants can only receive a super death benefit as a lump sum).
Tax treatment for each super component of a death benefit
|Benefit recipient||Tax-free component||Taxable (taxed) component||Taxable (untaxed) component|
|Dependant (received as a lump sum)||No tax payable||No tax payable||No tax payable|
|Dependant (received as an income stream)||No tax payable||
|Non-dependant (received as a lump sum)||No tax payable||Lower of marginal tax rate (including Medicare) or 17%||Lower of marginal tax rate (including Medicare) or 32%|