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Pension Death Benefits

If a member dies on or after 1 July 2007, a pension can only be paid to a tax dependent of the deceased.

A tax dependent is:

  • a spouse (or former spouse)
  • any child (including an adopted, step or ex-nuptial child) under 18 years
  • any person with whom the deceased member had an interdependency relationship
  • any person who was a dependent of the deceased member on their death

The taxation of a death benefit pension depends on the age of the deceased member (at the time of death) and the recipient as shown in the following table.

 
Tax Treatment
Age of recipient
Deceased died aged under 60
Deceased died aged 60 or over
Aged 60 or over
Tax Free
Tax Free
     
Aged under 60
Tax-free component: Tax Free
**Taxable component:Recipients
individual tax rate less 15% rebate
Tax Free

*The tax-free component consists of undeducted contributions, post 1994 invalidity, CGT exempt, pre-July 1983, and any after-tax contributions made from 1 July 2007.
**The taxable component is the total benefit paid less the tax-free component of the benefit.
Where a deceased member dies under 60 years of age and the recipient is under 60 years of age when they first start receiving pension payments then tax will be payable on the taxable component as shown in the above table. However, it is important to note that once the recipient reaches 60 years of age the pension payments become completely tax free.