Super Death Tax

Super Death Tax

There is no inheritance tax in Australia. But there is super death tax.

Super Death Tax

Super death tax can be a nasty surprise for your family when they are at their most vulnerable. So best to be avoided.

Who Gets Your Super

When you die, you leave your super behind. Your left-over super goes to your SIS dependants or your estate. That’s it. SIS dependants or estate. We cover all this in Who Gets My Super

Once this is clear, the next issue rears its head – tax.

How Much Tax

Your super might not arrive alone. It might arrive with a hefty tax bill in tow. The dreaded super death tax. To understand super death tax, you need to remember one thing. Your super had a good run. Tax deductions for contributions and a 15% or 0% tax rate. That is a pretty good deal.

The legislator did all this to help you fund your retirement. And to help those dependent on you. But now that you are no more, the legislator wants those tax concessions back for the super you left behind. Your non-tax dependants are not deemed worthy of these concessions. 

The argument is that outside of super you would have paid an average 30% tax, not 0% or 15%. And so your left over taxable components going to non-tax dependants get hit with a top up.  Top up back to 30% plus Medicare. This top up is the dreaded super death tax. How badly it hits depends on four factors.

1 – Tax Dependancy

When your super goes to tax dependants as a lump sum – no super death. Your tax dependants depended on you and now your super is all they got.  So the legislator goes easy on them. No tax. They will get every cent of your super.

But everybody else – any non-tax dependant – pays super death tax. But who is a tax dependant and who isn’t?  

Your spouse and your children under 18 are your tax dependants. Anybody financially dependant on you or living with you in an interdependency relationship qualifies as your tax dependant as well. And this can include your adult children per ATO ID 2014/22.

By the way, the official term is ‘death benefits dependant’ per s302-195 ITAA97, but that is too long and so everybody just says ‘tax dependant’.

2 – Super Components

Your super consists of a tax-free and a taxable component.  We cover all this in Super Components. 

Your tax-free component won’t trigger any tax – tax dependant or not – ever. You paid your non-concessional contributions out of after tax income. So there won’t be another tax charge.

But your taxable component does trigger super death tax when paid to non-tax dependants. 15% for any taxed element and 30% for any untaxed element, both plus 2% Medicare levy. 

3 – Type of Payment

Your super needs to go when you go. And so it either leaves the super environment straight away as a lump sum. Or it goes into somebody else’s super account as a pension. Different rules apply to either.

The tax treatment of a lump sum depends on whether a recipient is a tax dependant or not. Tax dependants pay no death tax. Everybody else only gets the tax-free component tax-free, but pays super death tax on the taxable component – 15% for a taxed and 30% for a tax-free element.

The tax treatment of a pension on the other hand doesn’t depend on tax dependancy. Anybody receiving a pension is a tax dependant anyway since the rules overlap. It also doesn’t matter whether it is a reversionary or death benefit pension. The tax treatment is the same. For a pension it is all about age – how old is the beneficiary now? How old was the deceased at the time of death?

Both 60 or over – no tax. One of them 60 or over – no tax. Both of them under 60 – super death tax on the taxable component, but only until the beneficiary turns 60. 

4 – Medicare Levy

Whether or not the 2% Medicare levy applies on top of a 15% or 30% tax rate depends on how the death benefit is paid.

If it comes directly from your super fund, the 2% Medicare levy applies. If it comes via your estate, the levy doesn’t apply. This little detail can easily cost your adult child $20,000 on a $1m lump sum death benefit.

So these are the 4 factors that determine how much super death tax your beneficiaries pay when they receive your super.

Does all this make sense? Just call me if it doesn’t. There might be a simple answer to your query. 



Super Fund

How Super Rules Change with Age

Super Contributions


Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Super Fund

Super Fund

Think of a super fund like a piggy bank. 

What is a Super Fund

The coins inside are your super. The piggy bank is your super fund. That is what it basically is. Except that a super fund is not limited to cash. And is a separate entity – a fund – rather than porcelain on your window sill, but the concept is the same.

Keep Safe

Putting your super into a separate entity – a fund – is to keep it safe – mainly from you. 

Imagine your rent is overdue, but you are broke. Would you use your super to pay the landlord if you could? Of course you would. At least most of us would. You take the money – not forever of course – you will pay it back next week. A week passes and you are still broke. A month. Three months – still broke. Your super is gone. 

To prevent this from happening, your super sits in a separate fund.

Fund Types

The fund holding your super could be an industry or retail fund. In these funds others manage and invest your super.

Officially, there are also government and corporate funds, but these tend to be a thing of the past. Too much of a headache for the companies and governments involved.

So industry and retail funds it is. These funds give you a few investment choices and then send you a statement every six months. The fee they charge for these services – a percentage of your super balance – will have already been taken from your super. 

But there is one more option you have. You could set up your own fund and manage your own super. This is called a self managed superannuation fund or SMSF for short. 


Whatever type of super fund you choose, a super fund is always a trust. This means five things. Just like a ‘normal’ trust your SMSF is

1 – Not a separate legal entity;
2 – Only a fiduciary relationship;
3 – Between trustee and at least one name beneficiary (‘member’);
4 – With respect to clearly defined trust property;

5 – Governed by a deed and law.

And like any other trust the SMSF trustee can be one or more individuals or companies. The later is referred to as corporate trustee.

Different to a Trust

But an SMSF is also quite different to a ‘normal’ trust in seven distinctive ways. An SMSF

1 – Pays income tax;
2 – Requires a condition of release to distribute;
3 – Distinguishes between accumulation and pension mode;
4 – For a pension must distribute a fraction of net assets, irrespective of income;
5 – Must follow investment rules;
6 – Requires an investment strategy;
7 – Has contribution caps.

A ‘normal’ trust doesn’t have or do any of these. And a ‘normal’ trust doesn’t refer to its beneficiaries as members.


Like any ‘normal’ trust, a super fund has a trustee – at least one trustee, but it could be more than one. And like any other trust, this trustee can be an individual or company. If the trustee is a company – preferably a special purpose company – it is referred to as a corporate trustee.

The trustee is the entity who actually owns the asset – legally. So the trustee is the one whose name is on the bank statement, share certificate, land register and so on. 

The trustee is also the one who acts, manages and decides. The trustee receives your contributions and pays your pension. It is the trustee you write to when you want to start or commute a pension or cash it all out.

If you have a SMSF,  you are the trustee. In an SMSF each member must be a trustee – by law – either an individual trustee or the director of a corporate trustee.

A non-member can’t be a trustee  – with two exceptions. If you lose capacity, your LPR will step into your shoes as trustee. And if your SMSF only has you as individual trustee, then another individual has to join you as trustee.


In a super fund beneficiaries are referred to as members. As a member you hold the beneficial ownership of the assets without being the legal owner. This means the assets have to benefit you as the member.

If you have an SMSF, you are a trustee as well as a member. This means that you will often write as a member to yourself as trustee. 


A super fund has to follow many rules, but these three are crucial:

Superannuation Industry (Supervision) Act 1993 (‘SIS Act’)
Superannuation Industry (Supervision) Regulation 1994 (‘SIS Regs’)
Income Tax Assessment Act 1997  (‘ITAA97’).

The SIS act sets out the road map. The SIS regulations fill out the details. And the ITAA97 stipulates how all this is taxed. 


All super funds have a regulator. The regulator is like an umpire making sure everybody plays by the rules. Handing out yellow and red cards when they don’t.

The regulator for SMSFs is the Australian Taxation Office (ATO). For all other funds it is the Australian Prudential Regulation Authority (APRA).

Regulated Superannuation Funds

Being a regulated super fund just means that the trustee has decided to play by the rules. The trustee has declared that the SIS Act and SIS Regulations are to apply to the fund. This is all it takes to become a regulated superannuation fund.

But being a regulated super fund doesn’t really mean anything. It just says that you want to comply.

Complying Superannuation Funds

What does mean something is being a complying superannuation fund. That will make a difference. Now you don’t just say that you want to comply. You actually do comply.

A complying super fund is a fund per ss42 and 42A SIS Act that complies with all relevant rules of the SIS Act and SIS Regulations. A fund is also a complying fund if the regulator has told them so in a compliance notice.

Once your super fund qualifies as a complying fund, two things happen. Your super fund:

1 – Can receive super guarantee (SG) contributions. Super guarantee is the 9.5% super your employer pays for you into a super fund of your choice.

2 – Qualifies for concessional tax treatment.

A non-complying fund on the other hand can’t receive SG contributions and doesn’t qualify for lower tax rates. 

Being a complying fund is not forever. If a fund breaks the rules, it can lose that status again. 

Financial Product

Your super – officially called ‘an interest in a superannuation fund’ in the Financial Services Reform Act 2001 – is a financial product. This means that only somebody with an AFS licence – Australian Financial Services Licence – is allowed to tell you what to do with it. 

Only somebody with an AFSL is allowed to tell you whether to make a contribution, split contributions with your spouse, take benefits as a lump sum or pension, make a binding death benefit nomination and so on. 

But there is a difference between telling you what to do and just giving you the facts. Telling you what to do requires an AFS licence. Just giving you the facts – explaining the rules of the game – doesn’t.

And by the way – since 1 July 2016 – accountants no longer have a so-called accountants exemption.


So this is a short summary of what your super fund is about. If you get stuck, please email or call us. There might be s simple answer to your query.



How Super Rules Change with Age

SIS Contribution Rules

Super Contributions


Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

How Super Rules Change with Age

How Super Rules Change

Some super rules change with age – some don’t.

How Super Rules Change with Age

The rules around superannuation are confusing. And one of the reasons for that is that some change as you age and some don’t. Here are 9 rules that change and 9 that don’t.

Super Rules Not Affected by Age

Not everything changes as you age. Some super rules stay the same from birth to death. They are not affected by age, neither yours nor anybody else’s.

1 – Tax Rates 

Your tax rates within super don’t change – no matter your age. You will always pay 15% tax on accumulation and 0% on pension within super.

2 – Tax Free

Your tax-free components will always be tax-free irrespective of age. Neither you nor any beneficiary will ever pay tax on tax free-components.

3 – Contributions

The rules around government co-contributions as well as spouse contributions apply irrespective of your age.

4 – Investment Rules

The rules around what your fund is allowed to invest your super in don’t change with age.

5 – Special Conditions of Release

Your age has no bearing on whether you meet a special condition of release like terminal illness, disability or financial hardship.

6 – Transfer Balance Cap

Your transfer balance cap and account is not affected by your age. Whether you can start a pension might depend on your age, but the amount doesn’t.

7  – SIS Dependants

SIS dependancy doesn’t depend on age. Whether you qualify as a SIS dependant or not has nothing to do with how old you are.

8  – Tax Dependants

Your tax dependancy doesn’t depend on your age as long as you are not a child of the deceased. 

9  – Administration

The rules around the administration of your fund – annual audit, annual return, TBAR reporting etc – are not affected by your age. 

Super Rules Affected By Age

What worries our lawmaker while you are young no longer worries them when you are old. And vice versa. And so many super rules change with age.

1  – Personal Contributions

Between 65 and 74 you must pass the work test to make personal contributions. Once you hit 75, the door is closed apart from SG and downsizer contributions.

2 –  Concessional Contributions

While a minor, your super can’t receive personal concessional contributions unless you run a business. Once you turn 18, the door is all open.

3 – Downsizer Contributions

You can only make downsizer contributions once you are aged 65 or more. 

4  – Superannuation Guarantee

Under 18 you have to work at least 30 hours per week and earn at least $450 per month to get the super guarantee. Once 18, only the $450 threshold applies.

5 – General Conditions of Release

General conditions of release depend on your age. Preservation age, turning 60 and 65 are important trigger points.

6 – Minimum Pension Payments

Your minimum pension payment percentage steadily increases with age. It starts at 4% under 65 and increase to 14% when 95 or older.

7 – Taxable Components of Benefit Payments

If you access your super before you turn 60, you pay tax on any taxable component. Once 60, any benefit payment to you is tax-free.

8 – Child Dependancy

While under 18, being somebody’s child automatically makes you a tax dependant and eligible for a death benefit pension. Past 18 it doesn’t. 

9 – Death Benefit Pension

A death benefit pension is tax-free when the deceased at the time of death and/or the beneficiary are 60 or older. It isn’t, while both are under 60.

So this is a short overview of how super rules change with age. If you get stuck, please email or call us. There might be a simple answer to your query.



SIS Contribution Rules


Cash Your Super Before You Die


Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.