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FocusOn – Taxation of Superannuation Death Benefits

The tax treatment of a superannuation death benefit depends on whether the beneficiary is a death benefits dependant, the form in which the payment is made, and whether the payment contains taxed components.

Type of Beneficiary

A death benefit dependant (DBD) is defined by tax law and includes your spouse (including former, de facto and same sex), your children (including ex-nuptial and adopted but not independent adults), any person who is financially dependent on you and any person deemed to be in an ‘interdependency relationship’ with you at the time of death.
A non-dependant is a beneficiary who falls outside the definition of a DBD.

Form of Payment

The superannuation death benefit can be paid either as a lump sum or pension.

Both a non-dependant and a DBD can receive a lump sum but a pension can only be paid to a DBD.

An existing pension may revert to the DBD following the death of the member or the DBD may nominate to commence a pension with the superannuation death benefit.

Components of a Death Benefit

A superannuation benefit may consist of two components being tax free and taxable.

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