There are a couple of things to consider if you're a reversionary beneficiary getting a death benefit from a loved one.
Tax
How much tax you pay (if any) will depend on:
- If you're a dependent for tax purposes
- How old you are currently
- How old the deceased was when they passed away
- The taxable and tax-free components that make up the benefit payment.
Transfer balance cap
There's a limit on the total amount of super you can transfer into tax-free retirement accounts, including our Retirement Income account, Lifetime Pension, Defined Benefit pensions and any income stream you receive as an eligible death benefit beneficiary. If you go over the cap, you'll be required to remove the excess and extra tax will apply.
This limit is known as the transfer balance cap and is managed by the ATO. It includes all your tax-free income streams across all your super funds. It's currently set at $1.9 million, but if you already have tax-free income streams, your personal limit could be between $1.6 million and $1.9 million. You can check your personal transfer cap on your ATO online account using myGov.
If someone nominates you as their reversionary beneficiary and you get a death benefit income stream, we'll report this to the ATO. To give you time you organise your accounts, it will count toward your transfer balance cap 12 months after the date the income stream transferred to you.
Centrelink
In addition, if you're currently getting Age Pension payments or Centrelink entitlements, taking over super from the deceased as an income stream or lump sum could decrease how much you can get.
Death benefits can be complicated so it could be worth getting some financial advice about how to manage your inheritance.