Many people are surprised to learn that some of their most valuable assets may not be covered by their will. With changes affecting testamentary trusts and the ongoing complexity of superannuation death benefits, now is a good time to review your estate planning arrangements and ensure they continue to reflect your wishes.
Testamentary trusts under the spotlight
Testamentary trusts have long been a popular estate planning tool because they can provide asset protection, flexibility and potential tax advantages for beneficiaries, particularly children.
The 2026-27 Federal Budget announced a new 30 per cent minimum tax on discretionary trusts, including testamentary trusts established through a will, from 1 July 2028.¹
Following industry consultation and community concern, the government announced exemptions for testamentary trusts, along with fixed trusts, special disability trusts and charitable trusts.²
While the final shape of the rules remains uncertain, the proposed changes serve as a reminder of the importance of reviewing estate planning arrangements regularly and ensuring they remain appropriate for your circumstances.
The risks of an outdated will
Many people prepare a will and then leave it in a drawer for decades. However, personal and financial circumstances can change significantly over time.
Marriage, divorce, the birth of children or grandchildren, the death of beneficiaries, changes in asset ownership, or business succession arrangements can all affect whether an existing will still achieves the intended outcome.
An outdated will can result in assets passing to unintended beneficiaries, create family disputes and potentially miss opportunities to achieve more effective outcomes.
For this reason, it’s important to review your will regularly, particularly following significant life events.
Who gets your super?
One of the most common misconceptions in estate planning is that superannuation automatically forms part of your estate. In most cases, it does not.
Instead, the trustee of your super fund generally determines who receives your death benefit unless a valid beneficiary nomination is in place.³
A binding death benefit nomination allows you to direct the trustee of your super fund to pay your death benefit to specific beneficiaries.
Without a valid binding nomination, the trustee generally has discretion to decide who receives the benefit, subject to the fund’s governing rules and superannuation legislation.
It’s also important to remember that not all nominations remain effective indefinitely. Some funds require nominations to be renewed periodically, while others allow non-lapsing nominations.
Who qualifies as a dependant?
For superannuation purposes, the definition of a dependant is often different from what many people expect.
Generally, dependants may include:
- a spouse or de facto partner
- former spouses in some circumstances
- children of any age
- individuals who are financially dependent on the deceased.
It may also include people in an interdependency relationship with the deceased. An interdependency relationship can exist where two people have a close personal relationship, live together and provide financial or domestic support to one another.⁴
Importantly, being a beneficiary under a will does not automatically make someone a superannuation dependant.
The tax consequences can be significant
The tax treatment of superannuation death benefits depends heavily on who receives the money.⁵
If a death benefit is paid to a tax dependant, the benefit is generally received tax-free. Tax dependants include spouses, children under 18, and people who were financially dependent on the deceased or in an interdependency relationship.
Adult children are often surprised to learn that they may not qualify as tax dependants for superannuation purposes. If an adult child is financially independent, tax may apply to some components of a lump-sum superannuation death benefit.
As super balances continue to grow, the difference in tax outcomes between payments to dependants and non-dependants can be substantial. This makes beneficiary nominations and estate planning decisions particularly important.
A coordinated approach is essential
Effective estate planning involves more than simply having a will in place. Superannuation beneficiary nominations, testamentary trust structures, tax implications and changing family circumstances should all form part of the conversation.
Regular reviews can help ensure your estate plan remains aligned with your objectives, reflects current legislation and reduces the risk of unintended outcomes for your beneficiaries.
If you’d like to review your estate planning arrangements and ensure they continue to reflect your wishes, please get in touch with our office.
i Introducing a minimum tax on discretionary trusts | ATO
ii Discretionary trusts reform implementation | Treasurer
iii Who gets your super if you die | Moneysmart
iv Superannuation interdependency relationships | AFCA
v Superannuation death benefits | ATO
Important Information:
CSF Private Wealth Pty Ltd (ABN 36 634 263 148) is a Corporate Authorised Representative No.1299668 of InterPrac Financial Planning Pty Ltd (Australian Financial Services Licence Number 246638).
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. Before acting on this information, consider whether it is appropriate to you, and seek personalised advice where required.
