Super lump-sum death benefit

The growing popularity of superannuation as a wealth creation vehicle, together with longer life expectancies, will entail an increasing number of financially independent adult children receiving super death benefits from their parents. This article will look at the treatment of life insurance proceeds included in super lump sum death benefits payment to non-tax dependants. Where the proceeds of a term life insurance policy are allocated to a deceased member’s superannuation interest, they will form part of the taxable component of that interest. If a deceased member’s interest is then paid as a lump sum to a tax dependant, the entire payment will be tax free (i.e. non-assessable, non-exempt income). Therefore, the super fund trustee generally will not be required to calculate the tax components or withhold any tax from the payment.

Tax dependants (in relation to the member) are as follows:

  • Spouse (including de facto and same sex)
  • Child under age 18
  • Financial dependant (including financially dependent adult child)
  • Interdependent relation
  • Individual who receives super lump sum death benefit where the deceased died in the line of duty


To find out more call Grabowski Financial Planning GFP group to book an appointment with a Financial Adviser.