Understanding a death benefit paid from a super fund

Payment to a trustee of a deceased estate

A super death benefit may be paid directly to the trustee of a deceased estate. This benefit is taxed in the same way it would have been taxed if the payment was paid directly to a dependant or non-dependant beneficiary.

This means the trustee of the deceased estate will pay tax on the superannuation death benefit to the extent that a dependant or non-dependant beneficiary has benefited, or may be expected to benefit, from the payment.

The trustee must include the super death benefit as part of the assessable income of the trust for the year. If you are a beneficiary of the estate you do not pay tax on any amount of the death benefit or include the payment as income in your income tax return.

Example

John is the trustee of his friend Garry's estate. Garry's will divides the estate evenly between his son Ryan, who is a dependant child, and Emily, who is a non-dependant. On 1 November 2007, John receives a lump sum super death benefit of $20,000 in his capacity as trustee of Garry's estate. The super fund informs John that this amount consists wholly of an element taxed in the fund.

Half of the payment will be treated as though it had been paid directly to Ryan and will not be taxed, as he is a dependant. The other half of the payment will be treated as though it had been paid directly to Emily and will be taxed at the rate of 15%, as she is a non-dependant.

As trustee, John will include $10,000 in assessable income of the trust for the year and the trust will receive a tax offset to ensure that it pays no more than 15% tax on this amount.

Ryan and Emily will not include any part of the benefit in their income tax return for the year.