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Do you have to pay tax on super death benefits?

When someone dies, their superannuation usually gets transferred to their beneficiary as superannuation death benefits. Depending on who the beneficiary is, the benefits may be taxed in some circumstances.

If you are a beneficiary, the amount of tax you pay depends on factors such as:

Someone who is tax-dependant will:

Lump sum payments

Lump sum super benefits paid to tax-dependant beneficiaries are not taxed, whereas those who are not tax-dependent will need to pay more tax and will only be able to receive the benefit as a lump sum. Not all super death benefits paid to a non-tax dependant are subject to tax. There are tax-free components that are made up of contributions after-tax that the member made to their super.

The taxed element (where the member paid tax in their super) of the taxable component of the benefit is subject to a maximum tax rate of 15% plus the Medicare levy. The untaxed element (where the death benefit is being paid from an untaxed super fund or includes proceeds from a life insurance policy held by the fund) of the taxable component of the benefit is subject to a maximum tax rate of 15% plus the Medicare levy.

Income stream payments

If the death benefit is paid in the form of an income stream, the tax treatment of the payment is dependent on the age of the deceased and beneficiary at the time.

If the deceased or the beneficiary is aged 60 or over at the time of the benefactor’s death and the super is paid from a taxed super fund, then the payment will not be taxed. If the age of the deceased and the age of the beneficiary are both under 60, the taxable portion of income stream payments will be treated as assessable income but will be entitled to a tax offset equal to 15% of the amount.

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News

High School Students, It’s Time To Get Creative About Tax & Super

June 16, 2021

The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.

Working as a part of a team or individually, students are invited to write, make or film an entry for their topic:

* Junior (Year 7–9) are asked to highlight the value of tax or super (or both) in the community

* Senior (Year 10–12) must discuss your first job and what you need to know about tax and super.

Shortlisted entries in 2019 included raps, songs, animations, video skits and even a board game. If you’re a high school student interested in competing this year or are the parent of one, this resource is a great way to see how people have gotten involved previously (and that you can draw inspiration from as well).

The competition opened on 24 May, but entries will be accepted until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos who is one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.

Tax Office Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.

“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.

You can watch Sally explain how to get involved on ATOtv.

Winners of the 2021 Tax, Super + You competition will be announced in September.

Looking for more information about the 2021 Tax, Super + You competition? Visit www.taxsuperandyou.gov.au/competition to find out more details.