Superannuation plays a central role in your financial future—but when it comes to planning your estate, it’s often overlooked. Yet it can be one of the most substantial assets left behind, and managing it properly could make a significant difference to the people you care about most.
This guide is for Australian individuals and families who are thinking ahead. Whether you’re updating your will, considering a self-managed super fund, or simply want to ensure your super goes where you intend, understanding how superannuation fits into estate planning is essential.
Let’s explore how super works when you die, who can receive your super benefits, and how to structure everything to reduce tax, avoid conflict, and maximise value for your loved ones.
Why Superannuation Doesn’t Automatically Form Part of Your Estate
Unlike your home or your bank accounts, superannuation doesn’t automatically fall under your will. That’s because super is governed by a trust deed and managed by trustees—either in a large retail or industry fund, or via your own SMSF.
When a member passes away, this triggers a compulsory cashing event. The trustee of the super fund is then required to pay out your death benefit—but not necessarily according to your will. If you don’t give the fund a valid instruction, the trustee may decide where it goes.
Who Can Receive Your Superannuation When You Die?
Only specific people can be legally paid your superannuation death benefit directly. According to the Superannuation Industry (Supervision) Act 1993 (SIS Act), these include:
- Your spouse or de facto partner (including same-sex partners)
- Your children (including stepchildren and adopted children)
- Someone with whom you had an interdependency relationship
- A financial dependant
If none of these people are suitable recipients, or if you want to leave your super to someone else (e.g. a sibling or parent), the only route is to have it paid into your estate, where it can then be distributed through your will.
But here’s the catch: Tax treatment differs depending on who receives the death benefit.
Tax Implications of Super Death Benefits
Under the Income Tax Assessment Act 1997, only certain recipients are considered tax dependants, which affects whether the benefit is taxed or not. A super death benefit is tax-free only if it’s paid to:
- A current or former spouse
- A child under 18
- Someone financially dependent on you
- Someone in an interdependency relationship with you
If your adult child is financially independent, for example, they may receive your super but could face up to 15% tax plus Medicare levy on the taxable component. This is a key reason why good estate planning is critical.
Making a Superannuation Death Benefit Nomination
To make your intentions clear, you should complete a death benefit nomination form with your super fund.
There are three main types:
- Binding Nomination: Legally requires the trustee to follow your instructions, provided the nomination is valid and up to date.
- Non-Binding Nomination: Guides the trustee but allows them discretion.
- Non-Lapsing Nomination: Stays in place indefinitely (unless revoked), and is often binding.
Most binding nominations expire after three years, so you’ll need to review and renew them regularly.
Defined Benefit Funds and Limitations on Nominations
If you’re a public servant or military personnel, you might have a defined benefit superannuation scheme—such as CSS, PSS, DFRDB, or MSBS. These are structured differently to typical accumulation funds and often don’t allow members to nominate beneficiaries directly.
Instead, your fund may pay a reversionary pension to a surviving spouse or children, or issue a lump sum based on complex formulas. In many cases, you’ll have little control over how these benefits are distributed.
Understanding the rules of your specific fund is critical, as the options available to you may be limited by legislation or fund policy.
Self-Managed Super Funds (SMSFs) and Estate Planning
For those who manage their own super through a self-managed super fund, planning becomes more intricate—and more important.
Here are a few issues to consider:
- Can the fund pay death benefits in specie (i.e., by transferring assets such as property or shares)?
- What happens to the fund’s structure when a member dies?
- Are there sufficient liquid assets in the fund to cover benefit payments?
- Who takes control of the fund when a trustee passes away?
If these matters aren’t addressed in advance, the wrong person could gain control of your SMSF and potentially redirect your super to someone you didn’t intend.
Engaging professionals—lawyers, accountants, and financial advisers—is highly recommended to ensure your SMSF estate planning is watertight.
Should You Direct Super Into Your Estate?
In some cases, it may be preferable to have your superannuation paid to your legal personal representative (your estate) so it can be distributed under your will.
This approach can be beneficial if:
- You want to include non-dependants as beneficiaries
- You’re establishing a testamentary trust for tax planning or asset protection
- You want to shield your super from family provision claims
- You’re managing a blended family situation
However, doing so may expose the funds to estate challenges or tax, depending on who inherits. It’s a strategic decision that should be made with professional advice.
Practical Tips for Planning Your Superannuation in Your Estate
- Review your super fund’s rules—some allow more flexibility than others.
- Make a valid binding nomination—and keep it up to date.
- Understand who counts as a dependant under both super and tax law.
- Discuss your plans with your executor or attorney—so they’re not caught off guard.
- Seek professional advice, especially if you have a self-managed fund or blended family.
Final Thoughts
Failing to plan properly for your superannuation could result in money going to the wrong person—or being taxed unnecessarily. Whether you’re single, in a long-term relationship, or have children from a previous marriage, careful superannuation planning is essential.
Superannuation is one of your most valuable assets. Treat it with the same consideration as your home or business, and ensure your final wishes are carried out exactly as you intend. Need help planning your estate and making sure your superannuation ends up in the right hands? Speak with our experienced team today to protect your legacy and provide for your loved ones with clarity and care.
