Superannuation After Death in Tasmania: Death Benefits, Nominations, and Tax

Superannuation is one of the most misunderstood assets in estate administration. Many Tasmanian executors assume super automatically flows into the estate and gets distributed according to the will. It does not. Superannuation operates under federal law, not state probate law, and the super fund trustee — not the executor — decides who receives the death benefit unless a valid binding nomination exists.

Getting this wrong can redirect tens or hundreds of thousands of dollars away from the intended beneficiaries, create unexpected tax bills, or leave the executor chasing funds that were never part of the estate in the first place.

How Death Benefit Nominations Work

There are three types of nominations, and they produce very different outcomes:

Binding death benefit nomination (BDBN). This is a legal direction to the super fund trustee. If the nomination is valid and current (typically renewed every three years, depending on the fund's rules), the trustee must pay the death benefit to the nominated person or the estate. No discretion, no delays. The nominated person receives the money directly — it never enters the probate process.

Non-binding (preferred) nomination. This is a guide, not an instruction. The trustee considers the nomination but retains full discretion to pay the benefit to any eligible person. The trustee independently assesses the deceased's financial dependants, their relationships, and who should receive the benefit. This assessment can take months and may produce outcomes the deceased did not intend.

No nomination. The trustee exercises complete discretion. They will contact potential recipients (spouse, children, financial dependants) and decide how to allocate the benefit based on their assessment of dependency relationships.

Who Can Receive a Death Benefit

Under federal superannuation law, the trustee can only pay a death benefit to:

• A spouse (married, de facto, or same-sex)
• Children of the deceased (including adopted and step-children)
• Any person in an interdependency relationship with the deceased
• Any person who was financially dependent on the deceased at the date of death
• The deceased's legal personal representative (the executor or administrator) — in which case the benefit enters the estate

If the benefit is paid to the estate, it becomes subject to probate and must be listed on the Form 10 Inventory of Assets and Liabilities. If paid directly to an individual, it bypasses the estate entirely.

Tax on Super Death Benefits

The tax treatment depends on who receives the benefit and whether the deceased had reached preservation age:

Tax-free component: All super contains a tax-free element (from after-tax contributions). This is always tax-free regardless of recipient.

Taxable component paid to a tax dependant (spouse, child under 18, financial dependant): No tax. The entire benefit is received tax-free.

Taxable component paid to a non-tax dependant (adult child who was not financially dependent): Taxed at up to 32% (including Medicare levy) on the taxable component. On a $400,000 death benefit where $300,000 is taxable, an independent adult child could face a tax bill exceeding $90,000.

This tax distinction creates a powerful incentive for the deceased to have maintained a valid binding nomination directing benefits to a tax-dependent spouse rather than adult children — but by the time the executor discovers the nomination status, it is too late to change it.

What the Executor Needs to Do

1. Identify all super funds. Check payslips, tax returns, the ATO's online services (using the deceased's myGov account), and any documentation found in the deceased's records.

2. Contact each fund with the death certificate and proof of your authority (Grant of Probate or Letters of Administration). Request: the current balance, whether a binding or non-binding nomination exists, who is nominated, and whether the benefit will be paid to the estate or directly to an individual.

3. If the benefit is coming to the estate, include it on Form 10 and manage it as an estate asset through the normal probate process.

4. If the benefit is going directly to a nominee, it is not part of the estate. Do not include it on Form 10. The nominee handles their own tax obligations.

Shares and Other Investments

Share portfolios follow a different path from super. Listed shares held in the deceased's sole name are estate assets that require a Grant of Probate to transfer. The executor must:

• Obtain a holding statement from the share registry (Computershare, Link Market Services) as at the date of death
• Value shares at the closing ASX price on the date of death for Form 10
• After the grant is issued, instruct the registry to transfer shares to beneficiaries or sell them through a broker

Shares held jointly pass to the surviving joint holder automatically — similar to joint tenancy property.

The Tasmania Probate Process Guide covers the super fund notification process, includes the ATO final tax return checklist, and explains how to handle super death benefits that are paid into the estate versus directly to nominees.

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