MoneySmart
(ASIC)
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% |
