Estate tax on super death benefit

If a deceased estate receives a superannuation death benefit, the estate may have to pay income tax on that benefit. If the executor does not withhold tax before paying out to the beneficiary in the Will, the executor may be personally liable.

If the benefit is paid out to a superannuation tax beneficiary, no tax is payable. This includes the deceased spouse and children under 18. The notable exception are adult children*. 

If they are not a superannuation tax beneficiary, the estate is liable for up to 15% tax on the taxable portion and 30% on the untaxed portion. For example, on a $200,000 super death benefit, there could be $30,000 tax for the estate to pay. If there is insurance included in the death benefit, this could be substantially more. 

If tax is payable, this is done by the estate lodging an income tax return. 

Please don't hesitate to contact us for any assistance we can provide.

* There are some exceptions that should be investigated by the executor.