Superannuation and Tax

Superannuation benefits can be paid either to the estate or to a dependant directly. If you want to have the benefits paid directly to a person, the superannuation fund will usually require a nominated beneficiary form (which can be either binding or non-binding upon the trustee) to be completed. 

The superannuation legislation defines a dependant as:- "any person who is or was the spouse of the person and any child of the person". 

Death benefits may also be payable to those financially dependent on the deceased at the time of death. Unlike spouses and children who are explicitly named in the legislation, financial dependants fall clearly within the normal meaning of "dependant".

It is important to make sure you update your nomination form with your superannuation fund when there are any changes in personal circumstances.

If the super fund has a binding system in place and you don't inform them of a change, then the superannuation fund is legally obliged to pay the benefits to the person nominated, even though you may not have wanted this particular person to receive the benefits.

Tax consequences of superannuation death benefits:

The taxation treatment of the benefit is dependent upon whether or not the recipient is a dependant or non-dependant and whether the benefits are in accumulation or pension phase.

There is a difference between the definition of a dependant for superannuation and taxation purposes. The taxation definition defines a dependant as a spouse, a child under the age of 18, and a person who was financially dependent upon the deceased.

Dependants:

From 1st July 2007, all lump sum death benefit payments made to a dependant are tax free.

Non-dependants: 

From 1st July 2007, death benefit payments made to a non-dependant are to be made as a lump sum and taxed at 15% (+ 1.5% Medicare Levy) irrespective of their age.


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