It’s easy to assume your super will be handled the same way as everything else you leave behind, but it follows a completely different process. Superannuation doesn’t automatically pass through your will — and who receives it depends entirely on how you’ve set things up.
For people across Bendigo and regional Victoria, super is often one of the largest assets built over a lifetime of work. Nominating beneficiaries and reviewing your super structure is a key part of making sure the right people receive what you’ve built — and in the most tax-effective way possible. The best time to do that? Before decisions are made for you.
Who Can Receive Super Without Paying Tax
Super can be one of the biggest assets transferred when someone passes away, but who can receive it tax-free depends on specific rules set by the ATO. The most tax-effective way for heirs to inherit super depends on who qualifies as a “tax dependant” under superannuation law.
These are the people who can generally receive superannuation benefits tax-free:
- Spouse or de facto partner – Includes same-sex partners and separated spouses (if not yet divorced) as long as the relationship existed at the time of death.
- Children under 18 – Minor children are automatically considered tax dependants. Once they reach 18, that treatment changes unless they qualify under another category below.
- Financial dependants – People who relied on the deceased for ongoing financial support (for example, an adult child with a disability or a parent living in the home).
- Interdependent relationships – Where two people shared a close personal connection, lived together, and provided financial and domestic support to each other.
If your beneficiary falls into one of these categories, the taxed portions of your super can usually be paid without additional tax being applied.
When Tax Applies on Inherited Super
If your beneficiary isn’t classed as a “tax dependant,” tax may apply — even if they’re a close family member. For example, adult children who weren’t financially reliant on you can face tax on the taxable component of your super death benefit.
Typically, this means a 15% tax (plus the Medicare levy) on the taxable portion — which can take a significant bite out of what’s left for your family. That’s why planning ahead is essential. The way your super is structured, and who it’s paid to, directly affects how much ends up in your loved ones’ hands.
Ways to Reduce Tax on Inherited Super
Without good planning, a decent portion of your super can end up with the ATO instead of your family.
Here are a few strategies that can help keep more in the hands of those who matter most
1. Withdraw Super Before Death
If someone has reached preservation age and is nearing the end of life, it may make sense to withdraw part or all of their super beforehand. Withdrawals made while alive can be tax-free to the member, compared to potentially taxable death benefits for non-dependants.
2. Re-Contribution Strategies
This involves withdrawing a portion of your super and then re-contributing it as a non-concessional (after-tax) contribution.
Over time, this reduces the taxable component of your balance, helping adult children or non-dependants receive more of your super tax-free.
(Professional advice is critical here to avoid breaching contribution caps.)
3. Review Fund Structure and Beneficiary Nominations
Make sure your beneficiary nominations are current and binding where possible. This ensures clarity around who receives what and helps avoid disputes or delays. The type of fund you hold — industry, retail, or SMSF — can also influence flexibility and control over outcomes.
4. Use Life Insurance Outside of Super
If you’d like to provide for adult children or others who aren’t tax dependants, consider holding life insurance outside of super. Those payouts go directly to beneficiaries tax-free, helping to offset any taxed super benefits they might receive.
5. Set Up a Testamentary Trust
For families with complex financial situations, a testamentary trust can provide long-term protection and tax efficiency.
It allows income to be taxed at individual rates and gives the executor greater control over how and when assets are distributed. Legal advice is essential for this step.
Before You Make Any Moves
Timing can make all the difference. If the balance is withdrawn before death, it’s often tax-free. But if it’s paid out after death as a lump sum or income stream, the tax treatment depends on the recipient’s relationship to the deceased.
While Australia doesn’t have an inheritance tax, super death benefits can still attract tax, and capital gains tax may apply if other assets are sold after death. Understanding the rules early can prevent unnecessary tax and stress later.
How Greybox Wealth Helps Bendigo Locals Plan Smarter
Sorting out who inherits your super rarely makes it to the top of the to-do list — until something prompts the conversation. At Greybox Wealth, we help clients understand how their superannuation and estate planning work together.
That means reviewing how your super is structured, who your beneficiaries are, and what the potential tax outcomes might look like for your family. We take the time to explain your options in plain language and, where needed, work alongside your accountant or solicitor to ensure your strategy is solid — legally, financially, and emotionally.
Ultimately, our goal is to help you keep more of your wealth where it belongs — with the people you care about.
Ready to Take the Next Step?
If you’re based in Bendigo or regional Victoria and want to ensure your super is structured correctly, we’d love to help.
Contact Greybox Wealth today to discuss your options and get clarity on how to make your super work best for your loved ones.