Understanding the Distinction of ‘Dependant’ for Superannuation and Tax
When it comes to superannuation and taxation, it’s essential to grasp the nuanced meanings of the term ‘dependant.’ This understanding can significantly impact the distribution of superannuation benefits and the tax implications associated with them.
When an individual passes away, their superannuation benefits can only be directed to one or more ‘dependants,’ as defined in the realm of superannuation. Alternatively, they can be paid to the legal personal representative for distribution following the deceased’s Will.
Here’s where it gets interesting: superannuation death benefits can potentially be entirely tax-free when paid (directly or indirectly) to individuals classified as ‘dependants’ for tax purposes.
However, the concept of a ‘dependant’ varies slightly between superannuation and tax contexts. For superannuation purposes, a ‘dependant’ of the deceased includes:
- Their spouse (including a de facto spouse)
- Their child (of any age)
- A person in an ‘interdependency relationship’ as defined with the deceased
- A person who was financially dependent on the deceased
Conversely, for tax purposes, a ‘dependant’ (or ‘death benefits dependant’) of the deceased is limited to their spouse or former spouse (including a de facto spouse) and only children under the age of 18.
Therefore, it’s important to note that superannuation death benefits generally cannot be directly paid to a former spouse, as they do not meet the criteria for super purposes.
If you’re contemplating estate planning involving your superannuation, we strongly encourage you to reach out to your SLA advisor. Our expert team is here to provide guidance and ensure your financial affairs align with your intentions and the intricacies of the law.