Tax and beneficiaries

The tax applied to your pension on your death depends on the circumstances of you and your beneficiary, as well as how the benefit is paid.

Death benefits paid as a pension

Component of super benefit

Both benefactor and beneficiary are under age 60

Either benefactor or beneficiary are 60 or over

Tax-free

Nil Nil

Taxable

Marginal rate plus Medicare Levy, less 15% pension offset

Nil

If the benefit is paid to a reversionary beneficiary as a pension, and either you or the dependant are aged 60 years or over at the time of your death, the pension benefit will be paid entirely tax free.

If both you and the dependant are under 60 at the time of your death, the pension benefit will be taxed as follows:

  • the tax-free component is tax free
  • the taxable component is assessable income but the dependant is entitled to a tax offset equal to 15% of the taxable component, and
  • when the dependant turns 60 the income stream is tax free.

Death benefits paid as a lump-sum

 

Beneficiary is a Dependant for tax purposes

Beneficiary is not a Dependant

Tax-free

Nil Nil

Taxable

Nil 15% + Medicare levy

If your death benefit is paid to a dependant for tax purposes as a lump sum then the benefit is tax-free.

If it is paid to a non-dependant as a lump sum, tax is deducted from the taxable component of the benefit at a rate of 15% (plus Medicare levy).

A higher rate will apply if the death benefit recipient does not provide their TFN to Media Super.

If the taxable component of a lump sum death benefit contains an untaxed element, this will be taxed at 30% (plus Medicare levy).