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Prescribed period for death benefit commutations

Section: 14.12

The commutation of a death benefit income stream will be treated in one of two ways in the hands of the beneficiary, depending on the timing of the commutation. This will affect the tax treatment of the benefit.

Within prescribed period
The commutation of a death benefit income stream will be treated as a super death benefit in the hands of the beneficiary if the benefit is paid within the latest of:

  • six months after the death of the deceased person, or
  • three months after the grant of probate of that deceased person's Will or letters of administration of that deceased person's estate, or
  • if the payment of the benefit is delayed because of legal action about entitlement to the benefit - six months after the legal action ceases, or
  • if the payment of the benefit is delayed because of reasonable delays in the process of identifying and making initial contact with potential recipients - six months after that process is completed.

The Commissioner has discretion to make a decision that the benefit is a super death benefit if paid outside of the prescribed period above.

Super death benefits are taxed as shown in section 7.3.

Outside of prescribed period
The commutation of a death benefit income stream will be treated as a superannuation member benefit in the hands of the beneficiary if the benefit is paid after the latest of the four dates outlined above.

The Commissioner of Taxation has discretion to make a decision that the benefit is a superannuation death benefit if paid outside of the prescribed period above.

Superannuation member benefits are taxed as shown in section 7.1 (lump sums) or 7.11 (income streams). As detailed in section 14.11, only a spouse may roll over a superannuation death benefit income stream.

Last modified: Tuesday, May 2, 2017