What is a binding death benefit nomination (BDBN)?

A BDBN is a written direction to the trustee specifying who receives your super on death. If valid, the trustee must pay accordingly — overriding their discretion. Most BDBNs lapse after 3 years unless the trust deed says otherwise.

Who counts as a 'dependant' for SMSF death benefits?

Under the SIS Act: spouse, child of any age, financial dependant, or someone in an interdependency relationship. Tax law is stricter — only spouses, minors and certain financial dependants receive benefits tax-free.

Why are adult children taxed on death benefits?

Adult, financially independent children are SIS dependants but not tax dependants. They pay 17% tax (15% + Medicare) on the taxable component of a death benefit lump sum.

Can my super pass through my will?

Not directly. Super sits outside your estate unless the trustee pays the benefit to your Legal Personal Representative. A BDBN nominating your LPR is the way to bring it into the will.

How can I reduce death benefit tax to adult children?

Two common strategies: (1) draw down the taxable component before death by taking lump sums in pension phase, or (2) re-contribute as a non-concessional contribution to lift the tax-free component. Get specific advice — both have caps and timing rules.

SMSF in retirement

SMSF death benefits: nominations, dependants and tax

By Tim Roff, Founder & SMSF Specialist · Updated 29 June 2026

Your SMSF doesn't automatically pass through your will. Here's how death benefits actually work, who counts as a dependant, and how to plan for the 17% adult-child tax.

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Offer ends midnight AEST, 1 July 2026. Applies to Individual and Corporate Trustee setup fees.

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Who gets your super when you die

On a member's death, the trustee must pay the death benefit to a dependant (under SIS) or to the member's Legal Personal Representative. Without a valid binding nomination, the trustee has discretion — which can lead to family disputes and unwanted outcomes.

A binding death benefit nomination (BDBN) removes that discretion. If valid and current, the trustee must pay as directed. Most BDBNs need to be renewed every 3 years; non-lapsing BDBNs are possible if the deed allows.

Tax is the second issue. Spouses, minor children and tax-dependants receive benefits tax-free. Adult, financially-independent children pay 17% (15% + Medicare) on the taxable component — which for many SMSF members is the bulk of the balance.

BDBN: trustee must follow — overrides discretion
Dependants (SIS): spouse, any child, financial dependant, interdependency
Tax dependants: spouse, minor children, certain financial dependants only
Adult children: 17% tax on the taxable component
Strategies: withdraw-and-recontribute, draw down taxable component first

Frequently asked questions

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