Most Australians are surprised to learn that while we don’t have an official “inheritance tax,” there is a tax on superannuation when you pass away. This often-overlooked rule can significantly reduce the amount your loved ones receive from your hard-earned retirement savings.

What Is the Superannuation Death Tax?

When you die, your super doesn’t automatically become part of your estate. Instead, it’s paid out as a superannuation death benefit to your nominated beneficiaries. Here’s the catch:

• If the beneficiary is your spouse, child under 18, or someone financially dependent on you, the payment is generally tax-free.
• If the beneficiary is an adult child or other non-dependent, the taxable portion of your super can attract up to 17% tax (or even 32% in some cases) before it reaches them. 

For families with large super balances, this can mean tens or even hundreds of thousands of dollars lost to tax.

Why Does This Happen?

Your super is made up of two components:

• Tax-free component – usually from after-tax contributions.
• Taxable component – from employer contributions and investment earnings.

The tax applies only to the taxable component when paid to non-dependants. 

Can It Be Avoided?

The good news? There are legitimate strategies that can reduce or even eliminate this tax. These often involve careful planning around:

• How your super is structured
• Who you nominate as beneficiaries
• Timing and type of withdrawals

Every situation is different, and the rules are complex. The right approach depends on your age, your super balance, and your family circumstances. 

Why Act Now?

Australia is in the middle of the largest intergenerational wealth transfer in history. If you’ve worked hard to build your super, you probably want as much as possible to go to your loved ones—not the tax office. 

Talk to Us

We help Australians protect their super from unnecessary taxes and ensure their wealth passes on as intended. If you’d like to explore your options, call us today for a confidential appointment. A short conversation now could save your family a significant amount later.