What are superannuation death benefits?
Superannuation death benefits payments consist of the member’s super balance (less any appropriate charges and taxes) plus any life insurance they may have had.
Who can apply for payment of superannuation death benefits?
Superannuation death benefits don’t form part of a person’s estate unless there is a binding death benefit nomination that directs the trustee of the fund to pay them to the estate, or the trustee otherwise exercises their discretion to pay to the estate.
Each superannuation fund is governed by its own terms. The following people are generally entitled to apply for a payment:
- A legal or de facto spouse
- Children
- Financial dependents
- Interdependants
- Legal Personal Representative (LPR)
If there are no dependants or legal personal representatives identified, the rules of the fund may permit the trustee to pay the death benefits to other people.
Tax treatment of superannuation death benefit payments
Tax Dependants can receive your super benefits and any life insurance held in your super fund tax free when you die.
If a Tax Non-Dependant receives your super benefits, they may have to pay tax on part of the super benefits. For more information about tax dependants and non-dependants, see this post.
The tax payable by Tax Non-Dependants will depend on how much of your super balance is comprised of concessional and non-concessional contributions (i.e. whether tax was paid on the money before it went into your super account). It will also depend on whether they will receive your super benefits as a lump sum payment, or as an income stream (or pension).
The calculations are very complex however the table below provides a simplified summary of the tax payable if your super is paid as a lump sum:
We recommend working with a financial adviser who can give you detailed advice about the likely tax consequences of paying your super and life insurance within super to your chosen recipients.
