Super death benefit tax estimator (lump sum to a non-dependant)

A superannuation lump sum paid because of a member's death is tax-free to a death benefits dependant as defined in section 302-195 of the Income Tax Assessment Act 1997: a spouse or former spouse, a child under 18, a person in an interdependency relationship with the deceased, or anyone else who was financially dependent on them. A lump sum paid to anyone else, most commonly an adult, financially independent child, is taxed under section 302-145: the taxed element of the taxable component at no more than 15%, and any untaxed element at no more than 30%. When the fund pays the beneficiary directly, the Medicare levy (generally 2%) is added. The tax-free component is not taxed at all.

Enter the taxed element of the taxable component (your fund's benefit statement or the deceased's last member statement shows the components) and the rate. Use 17% for a direct payment, 15% if the benefit is paid to the estate (the ATO does not apply the Medicare levy to death benefits received through an estate), or 32% for an untaxed element paid directly (common for some public sector schemes and insurance proceeds that create an untaxed element).

Formula: tax = taxable component × rate.

Worked example (illustrative): a $300,000 balance with a $60,000 tax-free component and a $240,000 taxed element is paid directly to an adult son. Tax = $240,000 × 17% = $40,800. He keeps $199,200 of the taxable component plus the $60,000 tax-free component, $259,200 in all. Had his mother withdrawn the balance as a tax-free lump sum while alive and over 60, or had the benefit gone to a dependant, there would have been no tax.

Limits: the tool ignores tax offsets, the beneficiary's other income and the timing of any withholding. Read the full worked example and check the ATO's guidance before relying on the figure.