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Two members in the fund both in their 40's & one dies leaving his share of the fund to the other member who is also a dependent - there is a BDBN. So no existing pensions.
Can a death benefit pension be paid to the dependent beneficiary and if so tax will be paid on the taxable portion of each payment using the proportionate rule?
How do we determine the pension amount to be paid each year?
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Roslyn Arthur
If the beneficiary chooses to be paid a "Death Benefit Pension" instead of a lump sum - then firstly it should be allowed by the Trust Deed and the BDBN should also allow the death benefit to be as a pension.
Assuming the Trust deed and BDBN both are ok to pay a pension - the beneficiary will have to request the trustee to commence a pension from the deceased super balance - you will have to prepare a set of accounts as on the date of death and note the the Taxable and Tax Free components of the deceased. The Trustee must also register for PAYG withholding Tax.
Because the beneficiary is is under 65, the minimum withdrawal has to be 4% (2% for 2020/21 - due to COVID - 19) and trustee is obliged to withhold tax and remit to ATO and issue a group certificate to the beneficiary.
Remember as death benefit lump sum is tax free to dependent - but pensions are not to those who are under 60 years old. As a strategy - some beneficiaries take some amounts as a lump sum (to pay off the home loan etc) and some as a pension. Since the deceased is also less than 65 - the minimum amount is also 4% in the year of death - once the beneficiary turns 66 - the minimum amount will increase as per schedule.
Manoj Abichandani