Superannuation does not automatically form part of your estate. This is one of the most misunderstood aspects of Australian super — and one that can have major consequences for how your wealth is distributed when you die.
Why Super Is Not Part of Your Estate
When you die, your super fund trustee distributes your super death benefit. The trustee has discretion over who receives the benefit unless you have a valid binding death benefit nomination (BDBN).
Because the trustee holds assets on behalf of the members (not the member personally), your Will does not automatically control what happens to your super.
Types of Death Benefit Nominations
| Nomination type | Effect | Binding on trustee? |
|---|---|---|
| Binding death benefit nomination (BDBN) | Trustee must pay the nominated person(s) | Yes — provided valid |
| Non-binding nomination | Trustee considers your preference but retains discretion | No — trustee can override |
| No nomination | Trustee decides based on dependants and estate | No — complete discretion |
| Reversionary pension | Pension reverts automatically to nominated beneficiary | Yes (for pension accounts only) |
Who Can Receive Your Super Death Benefit?
The SIS Act restricts who can be nominated as a beneficiary:
- Spouse (including de facto)
- Children (any age — biological, adopted, step-children, children of your spouse)
- Financially dependent persons (at the time of death)
- Interdependants (living together in close personal relationship, providing financial and domestic support)
- Your legal personal representative (estate) — this routes the super to your Will
Binding Death Benefit Nominations
A BDBN provides certainty about who receives your super. Key rules:
- Must be in writing and signed by you in the presence of two witnesses (who are over 18 and not beneficiaries)
- Most BDBNs must be renewed every 3 years (check your fund’s rules — some funds offer non-lapsing BDBNs)
- Must nominate eligible beneficiaries only
- Must be submitted to the fund in the approved form
If a BDBN is invalid (outdated, wrong beneficiaries, wrong format), it is treated as if there is no nomination — the trustee uses discretion.
Tax on Super Death Benefits
The tax paid on a super death benefit depends on who receives it and their relationship to the deceased:
| Beneficiary type | Tax on taxable component |
|---|---|
| Tax dependant (spouse, child under 18, financially dependent, interdependant) | Tax-free |
| Non-tax-dependant (adult child, sibling, other relative) | 17% + 2% Medicare levy = 19% on taxable component |
Important: Adult children (over 18, financially independent) are NOT tax dependants for super purposes even though they can be nominated. This can result in a large tax bill for them on the death benefit.
Strategies for Estate Planning With Super
Review your nomination regularly: BDBN lapses after 3 years if not renewed — the most common mistake
Consider a reversionary pension: If in pension phase, nominating a reversionary beneficiary (spouse) allows the pension to continue seamlessly with no immediate tax
Route super to tax dependants: If your estate would distribute to adult children, consider whether there are ways to manage the tax impact
Super to estate vs directly: Routing super to your estate (via “legal personal representative” nomination) includes it in your Will — but may trigger probate delays and tax
SMSF flexibility: SMSFs can offer more flexibility in pension design and beneficiary rules — relevant for blended families or complex estates
Common Mistakes
- Thinking your Will controls your super (it doesn’t, unless you nominate your estate)
- Not renewing a lapsing BDBN
- Nominating an ineligible beneficiary (e.g., a sibling who is not financially dependent)
- Not updating nominations after relationship changes (divorce, remarriage, new children)
For more: Death Cover in Super, Super and De Facto Relationships, Reversionary Pension. For estate planning advice specific to your situation, speak with a licensed financial adviser and an estate planning solicitor. Find an adviser via MoneySmart.