Tax-free Component

The tax-free component is the portion of your super made up of non-concessional (after-tax) contributions and certain other amounts. When paid as a death benefit, this component is always received free of death benefits tax, no matter whether the recipient is a tax dependant or not. It is the counterpart to the taxable component, and the larger your tax-free slice, the less tax your beneficiaries face.

Maximising the tax-free component is a common goal for people wanting to leave super to independent adult children. Example: Anita made after-tax contributions over several years so that, by her death, a large tax-free component meant her adult daughter paid almost no tax on the benefit. The split between components is fixed at the moment of payment, so any strategy to grow the tax-free portion must happen while you are alive.