The taxation implications of a superannuation death benefit can have a profound impact on the finances of those in a position to receive part or all of the payment. Paid out the wrong way and the recipient could be up for extra tax and lose valuable concessions along the way. If the named beneficiary is a tax-dependant, the entire benefit passes over tax free.
They could elect to take the money as an income stream or as a lump sum. In many cases, because the only financial dependant might be the partner of the deceased, financial planners will be quick to update the surviving partner’s beneficiary nomination paperwork when there are no further financial or tax dependants in line. Journalism for the curious Australian across politics, business, culture and opinion.
If the named beneficiary is not a tax-dependant, then it becomes more complicated because part of the payment becomes taxable income. Super death benefit payouts generally include two components. Nick Bruining Nick Bruining A tax-free part usually represents the non-concessional contributions paid in over the years, which extends to super downsizer contributions.
Next, there is a taxable component made up of the concessional contributions plus the earnings of the fund. Concessional contributions will include compulsory super, salary-sacrificed super and personal concessional contributions. The taxable part of the distribution to a non-tax dependent beneficiary is added to the beneficiary’s other income for the y.