Tax treatment of a Beneficiary

If the beneficiary is a dependant for tax purposes, the benefit received from the deceased super account is entirely tax free. A dependant for tax purposes is defined in the Income Tax Assessment Act 1997 (ITAA 97) to include:

• Your spouse, including de-facto of the same or opposite sex or former spouse;
• Your children (including step children), if under age 18 or age 18-25 and in full-time study;
• A person in an interdependency relationship with you; or
• A financial dependant 

If the beneficiary is a non-dependant for tax purposes (for example an adult child over age 18), the payment will be broken up into the tax-free and taxable components, as discussed earlier. Whilst any tax-free component is tax free, the taxable component on any super death benefit received by a non-tax beneficiary will be taxed at 15% plus Medicare Levy, and any untaxed element is taxed at 30% plus Medicare Levy.