Death benefit income streams

Commencement criteria

A death benefit can be paid in the form of a pension if the recipient is:

A SIS dependant (see below) who is not a child of the deceased ie includes:

A child¹ who is:

1:   A death benefit pension that is paid to a child must cease when the child reaches age 25, unless the child has a qualifying disability.

2:   A ‘qualifying disability’ is defined in the Disability Act 1986 (section 8) as a disability:

Tax treatment of death benefit income stream

Age

Tax free component

Taxable component

Element taxed

Untaxed element

Deceased and Dependant less than age 60

Non-assessable non-exempt income

Marginal tax rate* less

15% tax offset

Marginal tax rate*

Deceased or Dependant age 60 or more¹

Non-assessable non-exempt income

Marginal tax rate* less

10% tax offset

*    Plus Medicare levy

1:  Payments from death benefit capped defined benefit income streams may be subject to additional tax from 1 July 2017 where the deceased or dependant are age 60 or more.

Death benefit income streams – lump sum commutations

Circumstances

Tax treatment

Child death benefit pension commutation (where at least one pension payment has been made)

Non-assessable non-exempt income or can be rolled over to commence a new child death benefit pension

Death benefit pension commutation

Taxed as lump sum death benefit or can be rolled over to commence a new death benefit pension