Hi Albert

When a spouse receives a death benefit lump sum benefit it is received tax free.

Superannuation can be paid to a dependent (includes a spouse) as either or both:

* pension (income stream death benefit)

* lump sum

I note that your query states that the death benefit is to be paid as a lump sum.

The pension would normally be received tax free if the spouse is 60 years or older or if the deceased was 60 years or older. You would also need to take into account the $1,600,000 Transfer Balance Account rules.

If the deceased was under 60 years old at death & the spouse is under 60 the pension would be taxable re the taxable element at their marginal tax rate less a 15% tax offset.

I note that the deceased has died 12/11/2018 & it is not to be paid out / transferred until 1/7/2020. As the pension was not a reversionary pension then no minimum pension was required to be paid between these dates. The Fund's accounts should be able to claim exempt pension income from the period 12/11/2018 to 30/6/2020 in relation to the deceased's pension account.

If either account is to be paid as a pension then a new account would be established as a death benefit pension account and the required transfer balance account reporting would need to be done. There is also the ability to rollover such an account to another Superannuation Fund.

Given the time between date of death and the date that the benefits are paid out / transferred the trustees of the SMSF should get professional advice to make sure the death benefits are correctly accounted for & all tax issues considered.

SMSF AAA