Tax on death benefits

Super has rules – lots of them. From how much you can contribute to when you can access it, and what tax applies along the way. And yes, there are even specific tax rules for how your super (and any insurance benefit) is paid to your loved ones if you die. Let’s break it down.

• Before-tax (concessional) contributions – employer contributions and salary sacrifice – are generally taxed at 15%, up to the annual contribution cap of $30,000 (as at 1 July 2025). 

• After-tax (non-concessional) contributions – like BPay transfers –  aren’t taxed again because you’ve already paid income tax on that money. The limit is $120,000 a year (as at 1 July 2025). 

• Earnings in your super account are taxed at 15%. 

• Learn more in our Super Starter kit

• Once you’re over 60, retired, withdrawals from your pension account are tax-free.  

• At age 65, withdrawals are tax free regardless of your work status 

• Earnings in an account-based pension are tax-free, once you are over 60 and retired. (Some exceptions may apply, like government or defined benefit funds.) 

Understanding how tax applies to your super helps you understand how your super and insurance benefits will be treated if they are paid to your loved ones later on. 

Under superannuation law, you can only nominate people who qualify as a dependent or interdependent. These include: 

• A spouse or partner (any gender) 

• Your children, of any age 

• Someone you have an interdependent relationship with (e.g. you live together and support each other emotionally and financially) 

• Your legal personal representative (LPR - your estate) 

You can’t nominate a friend, charity, or extended family member – unless they meet the criteria as a dependent or interdependent. If you’re not married and don’thave children, it may be worth considering choosing to nominate your LPR and leave instructions in your will. 

If you’ve made a valid, binding nomination, the Trustee must follow your wishes. If you have a non-binding nomination the Trustee retain some discretion on the distribution. If you haven’t made a nomination, then the Trustee decides who receives your super. 

• For more on this, check out What happens to your super if you die?

If you were to pass away, your super and any attached insurance payout is paid as a lump sum from your Verve Super account. The tax treatment depends on two things:  

• who receives the payment  

• the tax paid on the money in your super – concessional or non-concessional contribution. 

Once the super is paid out, tax law determines how much (if any) tax applies.  

• If the person receiving your super is a dependent (for tax purposes), the whole payment is tax free. (Dependents are usually your spouse or partner, or your children under 18) 

• If they’re a non-dependent (for tax purposes), tax is charged on the taxable amount.  

This means someone might be an eligible super beneficiary, but not a tax dependent. For example, you can nominate your adult child, but unless they’re financially dependent or have a permanent disability or other applicable exclusion, tax will apply to any super payout they receive.   

• A valid, binding beneficiary nomination makes sure your super goes to the right people. Here's where to start.

• You can only nominate people who are eligible under superannuation law. 

• Payments made from your super to your beneficiaries are subject to tax. Tax is determined by tax law, not superannuation law. 

No. Superannuation is held in a trust and doesn’t automatically follow your will. To make sure your super goes to the right people, you need to make a valid beneficiary nomination with your super fund. 

It depends on who receives the super. If the recipient is a dependant under tax law (like a spouse or child under 18), the payment is usually tax-free. If it goes to a non-dependant, like an adult child who’s not financially dependent, tax applies to the taxable portion. 

Great question. You can nominate someone as a beneficiary under super law (e.g. an adult child). But for the payout to be tax-free, they must also qualify as a tax dependant. That usually means they’re a spouse, under 18, or financially dependent.