When Mrs Li died, her super account held a substantial balance, plus life insurance through the fund. Her will said 'all my assets go equally to my two adult children', but the fund told the family that super is not part of the estate, the fund trustee would decide who receives it, and payment to adult children might be taxed.
The direct answer: in Australia, superannuation is held by the fund trustee and does not automatically pass under your will. To make it certain who receives it, you generally need to give the fund a valid binding death benefit nomination (BDBN). Whether the recipient is a 'death benefits dependant' for tax purposes decides whether the benefit is tax-free.
At a glance
- Super is not part of the estate unless it is paid to the legal personal representative (the executor).
- Only 'dependants' as defined by law, or the legal personal representative, can receive it directly.
- In many retail and industry funds, binding nominations lapse every three years and must be renewed; for SMSFs, the trust deed is what mainly matters.
- Payments to a spouse or children under 18 are generally tax-free; for financially independent adult children, the taxable component may be taxed.
- Whether super is paid to adult children directly or through the estate can change the tax result.
先确认提名是否有效
谁可以领取身故福利, 约束性与不具约束力提名的区别, 以及2026年起部分基金推出的永不失效提名, 请参阅《您的退休金并不自动属于您的遗产》. 本文着重说明领取时的税务问题.
Tax on death benefits: what adult children should know
A 'death benefits dependant' for tax purposes is not exactly the same as the eligibility list above. It mainly includes a spouse or former spouse, a child under 18, a person financially dependent on the deceased, and a person in an interdependency relationship. A lump-sum death benefit paid to a tax dependant is generally completely tax-free.
Adult children who are financially independent are usually not tax dependants. In that case, the tax-free component is still tax-free, but the taxed element of the taxable component is taxed at up to 15%, and the untaxed element (common where life insurance is paid out within the fund) at up to 30%; if paid directly to the child, the Medicare levy may also apply. If paid through the estate, the tax is generally borne by the estate and the Medicare levy usually does not apply, but timing of distribution and the risk of claims against the estate must be considered.
Common problem situations
Blended families: without a binding nomination, the trustee may pay most of the super to the current spouse, and adult children from a previous marriage may receive little. Conversely, if the legal personal representative is nominated, once the super enters the estate it may become the subject of a claim against the estate. Which arrangement suits better must be considered together with the will and family relationships as a whole.
Expired or defective nominations: common problems include a witness who is also a beneficiary, wrong names or relationships, percentages that do not add up to 100%, and failure to renew after three years. Any of these can make the nomination invalid, leaving the super to the trustee's discretion again.
Living with or supporting adult children: if an adult child is genuinely financially dependent on a parent, or they are in an interdependency relationship, the child may be treated as a tax dependant, but this needs evidence, such as records of living together, financial support and care arrangements.
Practical checklist
- Log in to each super account and check whether there is a nomination, whether it is binding or non-binding, and when it lapses.
- Consolidate accounts you no longer need so insurance or old accounts are not overlooked.
- Decide who to nominate: a spouse, minor children or your legal personal representative.
- If you nominate your legal personal representative, make sure the will is consistent with your super plan and consider a testamentary trust.
- Review nominations after remarriage, divorce or when children become adults.
- Ask a financial adviser or tax agent about the size of the taxable component and whether it can be managed.
FAQs
Does it help to say in my will who gets my super?
Usually it has no direct binding effect. The fund trustee pays super according to the law and the fund's rules; the will only operates once super has been paid to the estate.
What happens if there is no nomination?
The trustee will usually exercise its discretion based on the fund's rules and the family circumstances, and may pay a spouse, children or the estate. Anyone who disagrees can complain through the fund's process and then to the Australian Financial Complaints Authority (AFCA).
Can children living overseas receive super?
Yes. Children are eligible dependants wherever they live. The tax treatment mainly depends on whether they are tax dependants, and overseas beneficiaries should also get advice on tax where they live.
Is a binding nomination always better than a non-binding one?
Not necessarily. A binding nomination gives more certainty, but if it lapses, is filled in incorrectly or is not updated after family changes, it can cause problems. Review it regularly.
Does the nomination also cover life insurance inside super?
Generally, life insurance paid out within the fund becomes part of the death benefit and is paid under the same nomination, but it may include an untaxed element that attracts more tax.
Chua Tan Associates has practised in Melbourne since 1990, providing wills, powers of attorney, probate and estate administration services in Mandarin, Cantonese and English. Justin Chua is a STEP Affiliate and a nationally accredited mediator, and the firm has a notary public who can notarise documents for use overseas. For help, call 03 9602 3988 or contact us online. We can meet at our Melbourne CBD office or by video.
This page provides general information only and is not legal advice.