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Do you have superannuation matters to discuss? Halfpoint

Super death benefits as an income stream

A SUPERANNUATION lump sum received by a death benefits dependent is received tax-free.

This may encourage the beneficiary to receive the amount as a lump sum.

However, consideration should also be given to the appropriateness of receiving the death benefit as an income stream (where eligible) to retain benefits within the concessional superannuation environment.

Some issues to consider when deciding whether to take a death benefit as a lump sum or pension include:

  • Need for access to capital to pay expenses
  • Eligibility to contribute to superannuation
  • Contribution caps
  • Preservation
  • Impact on Centrelink benefits.

Receiving death benefits as a superannuation income stream (new or continued) can provide taxation concessions, but this option is only available to certain beneficiaries.

Income streams may be considered for eligible beneficiaries who:

  • Are unable to contribute to superannuation, or
  • Will breach the contributions caps if the lump sum is recontributed to superannuation, or
  • Want to keep the money in superannuation and retain access to the capital, or
  • Would benefit from Centrelink exemptions, and
  • Will not exceed the $1.6 million pension cap.

A death benefit income stream will be tax-free to the beneficiary if either the deceased or beneficiary is over age 60 at the time of death and no untaxed element exists.

Otherwise, it will be taxable income to the beneficiary with a 15% tax offset applied until it becomes tax-free at age 60. Earnings in the fund are generally tax-free while a pension is paid.       

 



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