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Super Lump Sum Death Benefit - International Tex

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Hi, my UK nephew has just recieved 25% share of his Fathers Death Benefit Super Lump Sum,  there were 4 children recieving 1/4 each. Three of the Australian children recieved 147k minus tax  (100k not taxable and 15% tax then 2% Medicare levy on the remaining taxable portion) - resulting in 136k payment. My British born nephew has recieved 90k (147k minus 38-40% tax of the TOTAL amount). This seems totally unfair. Everything I read about tax on super lump sum death benefits, says he should have been taxed by his own country (if any), not ours, and definately not that amount.  In fact, another ATO link explains that anyone recieving super lump sum death benefit as a foreign resident of the Commonwealth should have been taxed the same as the Australian siblings, 15% and in fact NO 2% Medicare Levy? Can anyone shed some light on this subject?

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Hi @jademc

 

Welcome to our Community.

 

Your understanding is correct. Super death benefits paid to a foreign resident (not including former temporary residents) are subject to the same withholding tax rates as payments made to a resident. The Medicare levy doesn't need to be applied.

 

The payment is deemed to be Australian sourced income; however a resident of a foreign country that has a double tax agreement with Australia may have no Australian tax imposed.

 

It sounds like you have already looked at this, but for more information you can check out the super death benefits page on our website.

 

When a super death benefit lump sum is paid, there can be up to three components: tax-free, taxable - taxed and taxable - untaxed. The payer (the super fund or the deceased estate) taxes the payment in accordance with how much each component is.

 

The components should have been the same for all four beneficiaries. Based on the information that you have given, assuming that the tax-free component was $100,000, it sounds like your UK nephew's taxable component was taxed at more than 100%.

 

We recommend that you or your nephew get in touch with the payer (the super fund or the executor) to find out how they worked out the tax as it isn't obvious as to how they did it.

 

Hope this helps.

 

Thanks,

 

ChrisR

1 REPLY 1
Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @jademc

 

Welcome to our Community.

 

Your understanding is correct. Super death benefits paid to a foreign resident (not including former temporary residents) are subject to the same withholding tax rates as payments made to a resident. The Medicare levy doesn't need to be applied.

 

The payment is deemed to be Australian sourced income; however a resident of a foreign country that has a double tax agreement with Australia may have no Australian tax imposed.

 

It sounds like you have already looked at this, but for more information you can check out the super death benefits page on our website.

 

When a super death benefit lump sum is paid, there can be up to three components: tax-free, taxable - taxed and taxable - untaxed. The payer (the super fund or the deceased estate) taxes the payment in accordance with how much each component is.

 

The components should have been the same for all four beneficiaries. Based on the information that you have given, assuming that the tax-free component was $100,000, it sounds like your UK nephew's taxable component was taxed at more than 100%.

 

We recommend that you or your nephew get in touch with the payer (the super fund or the executor) to find out how they worked out the tax as it isn't obvious as to how they did it.

 

Hope this helps.

 

Thanks,

 

ChrisR