When a super fund member dies, the remaining super is paid as a death benefit. Who can receive it, and how much tax is withheld, depends on two different ideas of a "dependant": one in superannuation law, which governs who the fund can pay, and one in tax law, which governs how the payment is taxed.
A spouse is usually a dependant under both. An adult child is often able to receive a lump sum from the fund, but is not automatically a tax dependant. The Australian Taxation Office (ATO) says a child over 18 must be financially dependent on the deceased, or in an interdependency relationship, to be a dependant for tax purposes.
This explainer follows the ATO's superannuation death benefits page and the death-benefits section of Tax on super benefits, last updated 2 August 2023. Binding nominations, wills and fund rules also matter, and they are not a substitute for legal advice.
This is general information only. It is not personal advice, estate-planning advice or a tax assessment.
Who can the fund pay?
Under superannuation law, you are a dependant of the deceased, at the time of death, if you were:
- their spouse or de facto spouse (of any sex)
- a child of the deceased, of any age
- a person in an interdependency relationship with the deceased
The ATO describes an interdependency relationship as one where two people have a close personal relationship, live together, and one or both provides the other with financial support and with domestic support and personal care.
If you want the super to go to someone who is not a dependant under superannuation law, the ATO says to ask the fund about a binding death benefit nomination so the payment can be made to your legal personal representative and distributed under your will. Fund rules still control whether a nomination is valid, and a lapsed or non-binding nomination can leave the trustee to decide. Check the fund's form and expiry rules while you are alive, rather than assuming a will alone directs the super.
A death benefit can be paid to a dependant as a lump sum or, in some cases, as an income stream. If it is paid to someone who is not a dependant under superannuation law, it must be a lump sum.
Who is a dependant for tax?
For tax purposes, the ATO says you are a dependant of the deceased, at the time of death, if you were:
- their spouse or de facto spouse (of any sex)
- a former spouse or de facto spouse
- a child of the deceased under 18
- in an interdependency relationship with the deceased
- any other person dependant on the deceased
The tax-law interdependency test is generally the same as the super-law test, with an extra limb: two people may still have an interdependency relationship for tax if they have a close personal relationship and the reason they do not meet one or more of the usual requirements is that one or both has a physical, intellectual or psychiatric disability.
Being financially dependent means you relied on the deceased for necessary financial support. The ATO states plainly that children over 18 must be financially dependent on the deceased to be considered a dependant. Occasional help, or a parent-child relationship on its own, is not the test the ATO describes.
This split has practical consequences. A former spouse can be a tax dependant even if the fund cannot pay them directly. An adult child can often be paid by the fund, but the taxable component of a lump sum may then be taxed unless they also meet the tax-dependant test.
How is a lump sum taxed?
A super benefit usually has a tax-free component and a taxable component. The taxable component can have a taxed element, where the fund has already paid tax, and sometimes an untaxed element, most often in a public sector fund. The fund can tell you the split.
If you are a dependant of the deceased for tax purposes, the ATO says you do not need to pay tax on the taxable component of a death benefit you receive as a lump sum.
If you are not a dependant for tax purposes, you can only receive the benefit as a lump sum. The taxable component is entitled to a tax offset that ensures the rate of income tax is:
- a maximum of 15%, plus the Medicare levy, on the taxed element
- a maximum of 30%, plus the Medicare levy, on the untaxed element
Those are official maximum rates on the taxable component, not a flat fee on the whole account. The tax-free component is not included in that taxable-component calculation on the ATO's death-benefits tax page.
The Medicare levy is the standard levy that applies to the person who is taxed, where it applies. It is in addition to the 15% or 30% maximums the ATO quotes.
If the benefit is paid to the legal personal representative, the tax outcome can depend on who is expected to benefit from the estate. That is a technical area. Do not assume that paying the estate, rather than an adult child directly, removes tax, and get advice if an estate, a trust or a former spouse is involved.
When can a death benefit be an income stream?
A super income stream is a series of regular payments, at least annually, from a retirement account. The ATO says there are limits on who can receive a death benefit income stream. Children can only receive one if they are:
- under 18, or
- under 25 and financially dependent on the deceased, or
- living with a permanent disability
Adult children with a permanent disability can continue to receive an income stream after they turn 25. In other cases, the income stream must change to a lump sum on or before the date they turn 25.
Tax on a death-benefit income stream can depend on whether it is account-based or a capped defined benefit income stream, on whether the super is taxable or tax-free, and on the ages of the deceased and the recipient. The ATO sends you to the detailed rate tables for those scenarios rather than a single percentage. A death-benefit income stream also interacts with the recipient's transfer balance cap. A child recipient has a modified personal transfer balance cap.
If you receive a death-benefit income stream, you may also need to think about Division 296 in later years, because the ATO includes certain death-benefit income-stream interests when it works out a total super balance for that tax. Child recipients of a super income stream are excepted from Division 296 in the year they have that status.
Nominations, timing and practical steps
While you are alive:
- complete a binding nomination if you want the fund to be directed, and diary any expiry date
- keep the fund's record of your dependants and your legal personal representative up to date
- understand that super does not automatically follow a will unless the payment is made to the estate
- consider whether a spouse pension, a lump sum, or a mix is allowed under the fund rules
After a death, the person claiming will usually need a death certificate, identity documents and, if the estate is involved, probate or letters of administration. The fund decides the payment under the law, the trust deed and any valid nomination. Tax is withheld where the official rates require it, and the recipient may need to include the payment in a tax return.
This is not a reason to delay contacting the fund, but it is a reason not to spend an expected payment before the trustee has decided and the tax has been withheld.
Frequently asked questions
Is a binding nomination enough to avoid tax?
No. A valid nomination can control who the fund pays. It does not change the tax-law definition of a dependant. An adult child who is paid under a nomination can still be taxed on the taxable component if they are not a tax dependant.
Does a spouse pay tax on a lump-sum death benefit?
The ATO says a tax dependant does not need to pay tax on the taxable component of a death benefit received as a lump sum. A spouse or de facto spouse is a tax dependant on the official list. An income stream is a different calculation.
Are funeral or executor payments different?
Some funds allow a limited reimbursement of funeral costs, and an executor may receive money on behalf of the estate. The tax and the recipient still follow the official death-benefit rules. Ask the fund and, if needed, a registered tax agent, rather than treating a reimbursement as a separate tax-free gift.
General information warning
This article is general information only. It is not personal financial product advice, legal advice or tax advice, and it is not a recommendation about a death-benefit nomination or a payment choice. It does not take into account your objectives, financial situation or needs. Super-law and tax-law dependants are not the same, fund rules differ, and the tax on an income stream or an estate payment can be complex. Consider speaking with a licensed adviser, a solicitor and a registered tax agent, and confirm the current ATO pages, before you make a nomination or receive a benefit.
Sources
- Australian Taxation Office, Superannuation death benefits, including payment methods, the two dependant definitions, interdependency, child income-stream limits and binding nominations to a legal personal representative.
- Australian Taxation Office, Tax on super benefits, last updated 2 August 2023, including lump-sum death-benefit tax for dependants and the maximum 15% and 30% rates plus Medicare levy for non-dependants.
- Australian Taxation Office, Division 296 tax on large super balances, last updated 3 November 2026, on the child-recipient exception.
Last reviewed: November 2026.