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Taxation of super benefits

Terminal medical condition benefit payments

Section: 7.2

Clients with a terminal medical condition who withdraw superannuation lump sums under age 60 are not subject to tax on that lump sum.

A payee will be taken to be assessed as suffering from a terminal medical condition if two medical practitioners (at least one of these is a specialist) certify that the member is suffering from an illness or has incurred an injury, that is likely to result in the death of the person within a period of 24 months. A superannuation condition of release also applies to terminal medical illness.  See section 12.3 for more information.

Note: Once a person has advised his or her superannuation fund of their terminal medical condition they cannot roll over their super benefits. Terminal medical condition benefits may only be cashed out as either a lump sum or a pension.

Where such a benefit is transferred between complying super funds, the transfer will be treated as having been cashed out as a lump sum and re-contributed for tax and contributions cap purposes and excess contributions tax could apply.

Last modified: Friday, January 12, 2018