Dependants vs non-dependants
For tax, a dependant includes a spouse, a child under 18, someone financially dependent on you, or someone in an interdependency relationship with you. Death benefits paid to tax dependants are generally tax-free. Adult children who aren’t financially dependent are usually non-dependants.
The tax for non-dependants
For non-dependants, the tax-free component is tax-free and the taxable component (taxed element) is taxed at up to 15% plus Medicare levy. An untaxed element can be taxed at up to 30% plus Medicare levy. Paying it via your estate removes the Medicare levy, but exposes the money to the estate process.
Steps to review
- Check if your fund allows binding nominations, and whether yours are current (some lapse).
- Decide whether super should go direct to people or to your estate.
- Consider a recontribution strategy.
- Line up your will, powers of attorney and insurance.
Quick answers
Do adult children pay tax on inherited super?
Usually on the taxable component, at up to 15% plus Medicare levy if paid directly, per the ATO.
Sources
General advice warning. This article is general information only and does not take into account your objectives, financial situation or needs. Rules and thresholds change; check the sources above. Consider the relevant PDS and our Financial Services Guide and seek personal advice before acting. FinForce is authorised under Financial Force Pty Ltd AFSL 238337. Shay has been authorised since 18 October 2011.