Death Tax Australia – Consider The Superannuation Effects

Death tax Australia is our topic for today, and how this affects when you should take out your super.

Like most people, you may want to keep as much money in your superannuation account for as long as possible, as the longer your superannuation has a chance to stay within your account, the better the returns you may see (depending on how your investments perform).

People often ask if they really have to take their money out, and the simple answer is no. You never have to take your super out if you don’t want to. There are many rules regarding keeping money in super (including the conditions and requirements to withdraw, meeting preservation ages, etc.). However, few of these rules and requirements will force you to take your super out or withdraw your superannuation if you don’t want to.

The only time your superannuation must be paid out is following your death (which obviously means you won’t receive that money), where the money will be paid out to your beneficiaries.

However, the question to answer is whether or not you should leave your superannuation in place until you die. The answer to this comes down to who is ultimately receiving the money from your super.

If the money is paid out to your spouse, it will be tax-free, and they will have no issue accessing it. The good news is you can keep as much of your superannuation in your super account for as long as necessary while you’re still alive.

When you are a married couple, you can leave your super to each other. However, the surviving spouse usually leaves their super to their adult children, and therein lies the tax problem.

When your superannuation is paid to your children over 25 (without a disability), they will have to pay 17% tax on any taxable component of your super. To avoid this situation, you should seek professional advice to compare the tax consequences of taking your super early (where you pay the tax on the earnings) versus leaving it in super and your children paying 17% on the taxable component.

It may be that the next generation of Australians will need to be involved with their aging parents’ money management to ensure that they are not going to be hit with Australia’s death taxes on super.

Remember, this tax discussed is only payable on the taxable component of your superannuation – you can put some strategies in place during your 60s that can reduce the taxable part of your super. If you are in your sixties, you should obtain advice from professionals to reduce the impact of death benefit taxes on your adult children when your superannuation must finally be paid out to them.


The information contained in this publication is for general information purposes only, and does not take into consideration your individual circumstances. You should obtain personalised professional advice before acting upon any information contained herein. To the maximum extent permitted by law, we accept no responsibility for any loss incurred by any person directly or indirectly due to any action taken or refrained from as a consequence of the contents of this publication.

About The Author

Adrian Monarca
Adrian is Co-Founder, CFO, and the Principal Accountant at Float Accounting.