It’s one of the most common questions Australians ask when planning their estate:Can my children inherit my super?The answer is yes but it’s not automatic.Superannuation doesn’t work like a regular bank account or investment. It’s managed under special laws, and what happens to it when you pass away depends on how you’ve set things up.
In this guide, we’ll break down what happens to your super after death, how your children can receive it, and how to structure your nominations properly so your money goes where you want without unexpected tax or delays.
What Happens to Your Super When You Die?
Your superannuation balance doesn’t automatically form part of your will or estate.That surprises many people.When you die, your super fund holds what’s called a superannuation death benefit this includes:
- The balance of your super account, and
- Any life insurance held within the fund
Your super fund’s trustee is then responsible for deciding who receives this money unless you’ve given them clear instructions through a valid binding death benefit nomination.
If you haven’t nominated anyone, the fund’s trustee will decide based on legislation and the fund’s rules. Often, it will go to your spouse or to your estate but that’s not guaranteed.
Can My Children Inherit My Super?
Yes your children can inherit your super, but there are specific conditions on how and when they can receive it.Under Australian law (the Superannuation Industry [Supervision] Act 1993, or SIS Act), your super can only be paid directly to people who are considered your dependants at the time of your death.
Your dependants can include:
- Your spouse or de facto partner
- Your children (including adopted and stepchildren, regardless of age)
- Anyone financially dependent on you
- Anyone in an interdependent relationship with you (for example, someone you live with and share finances or care responsibilities with)
So, your children are automatically considered dependants under super law but that doesn’t mean every child receives the money the same way.
How Your Children Can Receive Your Super
There are two main ways your super can be paid to your children when you pass away:
1. As a Lump Sum Payment
This is the most common way super is paid to children.Adult children, for example, can usually only receive a lump sum, which means the super fund transfers the full benefit to them in one payment.
This option is straightforward but can have tax implications (explained below).
2. As a Regular Income Stream (Pension)
In certain cases, your children can receive your super as an ongoing income stream similar to a pension payment.
This can only happen if:
- The child is under 18 years old, or
- Aged 18–25 and financially dependent on you at the time of death, or
- They have a permanent disability
Once a dependent child turns 25, the income stream usually has to stop and be converted into a lump sum payout, unless the child has a permanent disability.
How Super Inheritance Is Taxed
This is where many families are caught by surprise.
Whether your children pay tax on your super inheritance depends on whether they’re considered tax dependants under Australian law.
These definitions differ slightly from the superannuation laws.
Here’s the breakdown:
| Recipient | Tax Dependant? | Tax on Death Benefit |
|---|---|---|
| Spouse or de facto partner | ✅ Yes | Tax-free |
| Child under 18 | ✅ Yes | Tax-free |
| Child 18–25 and financially dependent | ✅ Yes | Tax-free |
| Adult child not financially dependent | ❌ No | Taxed 15%–17% (including Medicare levy) |
So, if your children are financially independent adults, part of the payment (called the taxable component) will usually be taxed at 15% plus the 2% Medicare levy, while the tax-free component is not taxed at all.
Example: How Tax Might Work
Let’s say your super balance is $400,000, and it includes:
- $300,000 taxable component
- $100,000 tax-free component
If your adult child inherits this super:
- The $100,000 tax-free part stays tax-free
- The $300,000 taxable part is taxed at 17%, meaning $51,000 goes to the ATO
Your child would receive $350,000 after tax.
If the same payment went to your spouse or financially dependent child, it would be completely tax-free.
What If I Haven’t Nominated a Beneficiary?
If you haven’t nominated anyone to receive your super, the fund’s trustee decides who gets it often based on who they determine was most financially dependent on you.
In most cases, they may:
- Pay it to your spouse or de facto partner, or
- Pay it to your estate, to be distributed under your will
This process can delay payment and lead to disputes among family members.That’s why making a binding death benefit nomination is one of the most important estate planning steps you can take.
How to Ensure Your Children Inherit Your Super
To make sure your children receive your super according to your wishes, follow these steps:
1. Make a Binding Death Benefit Nomination
A binding death benefit nomination gives your super fund clear, legally enforceable instructions about who should receive your super when you die.
You can nominate:
- One or more dependants (e.g., spouse, child), or
- Your legal personal representative (so the money goes into your estate and is distributed through your will)
Important:
- These nominations usually expire every three years, so you need to renew them.
- Some super funds now offer non-lapsing nominations, which stay in place until you change or revoke them.
2. Keep Your Super and Will in Sync
Your will and superannuation are two separate legal documents and they don’t automatically align.
If you want your will to control who receives your super, you must nominate your legal personal representative in your super fund.
Otherwise, the trustee can pay your super directly to dependants even if your will says something different.
3. Consider the Tax Implications
Even if your children are the right beneficiaries, you want to make sure they don’t pay unnecessary tax.
Working with a financial adviser or estate planner can help you:
- Understand the taxable and tax-free parts of your super
- Rebalance contributions for better tax outcomes
- Plan super withdrawals strategically before death to reduce future tax for your heirs
4. Review Your Super Regularly
Life changes marriages, divorces, children becoming adults, or new dependants can all affect who’s eligible for your super.Review your super nominations at least every two to three years, or whenever a major life event happens.
What About Stepchildren or Adopted Children?
Under Australian law, stepchildren and adopted children are treated the same as biological children for the purpose of superannuation death benefits.That means they can inherit your super as long as they qualify as dependants or are included in your estate.
However, if your relationship with their parent ends (e.g., through divorce), your stepchildren may no longer be eligible unless you update your nomination or will.
Can I Leave My Super to My Grandchildren?
You can but not directly, unless they are financially dependent on you at the time of your death.Otherwise, your super can only go to them through your estate.This means nominating your legal personal representative and specifying in your will how you want it distributed.
FAQs:
1. Can my adult children inherit my super directly?
Yes. Your adult children can inherit your super, but they’ll usually receive it as a lump sum, and part of it may be taxed.
2. How much tax will my children pay on my super?
If they’re not financially dependent, they’ll pay up to 17% tax on the taxable portion of your super.
3. What happens if I die without nominating a beneficiary?
Your super fund’s trustee decides who receives your benefit, which can delay payments or cause disputes.
4. Can I make my nomination permanent?
Yes. Some super funds offer non-lapsing nominations, which don’t expire unless you change them.
5. Should I get advice about super inheritance?
Absolutely. Superannuation death benefits are complex, and professional guidance helps ensure your money is passed on smoothly and tax-efficiently.
What Happens to My Super When I Die?
So, can your children inherit your super?Yes but it’s not automatic, and the outcome depends on your planning.Without a valid nomination, the trustee decides who receives your money. Without tax planning, your children may lose tens of thousands of dollars in unnecessary taxes.
The best way to protect your family is to:
- Make a valid binding death benefit nomination
- Align your super and your will
- Review both regularly with professional guidance
At Wealthlab, we help Australians protect their legacy by structuring their superannuation and estate plans with clarity and care so your hard-earned wealth supports the people you love, exactly as you intended.
Book a free consultation today to make sure your super is protected and your family’s future is secure.
Learn More About Retirement & Superannuation
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