Who counts as a Dependant of my SMSF?
Superannuation death benefits can only be paid to a member’s dependants (SIS dependant), the member’s legal personal representative (executor of the will or administrator of their estate) or, if the deceased member does not form an estate and no SIS dependants can be found – any other person.
Why is it so important to know who counts as a dependant for SIS purposes?
A SIS dependant determines who can receive the death benefits. Super death benefits are taxed concessionally and can be tax-free when paid to a person who is a dependant for tax purposes, known as a death benefits dependant.
Who is a dependant for SIS vs Tax purposes?
The following table is a summary of SIS vs Tax dependants:
| Relationship to the deceased | SIS dependant | Death Benefits dependant |
| Current spouse | Yes | Yes |
| Former spouse (divorced) | No | Yes |
| Brother or sister | No | No |
| Parent | No | No |
| Child of the deceased | Yes – no age restriction (includes adult child) | Yes – under 18 |
| Interdependency relationship | Yes | Yes |
| Financially dependant | Yes | Yes |
Hint – Whether a person is a SIS dependant is determined at the time of the member’s death. A spouse includes a married couple, de facto relationship, same sex partner. A child of the deceased can include a biological child, adopted or stepchild, ex-nuptial child or a child of the person’s spouse. If the deceased member died in the line of duty and was a member of the Australian Defence Force, Australian Federal Police or a member of the police force, a SIS dependent receiving a super lump sum death benefit as a result will be deemed to be a death benefits dependant and receive it tax-free.
Example – Ron died, survived by his ex-wife, Lorna, and their two children, aged 16 and 23. Neither his ex-wife nor his 23-year-old daughter was living with Ron or financially dependent on him at the time of his death. Ron wanted to ensure his ex-wife and children benefited from his superannuation, as he never remarried.
Ron’s death benefits can be paid to his two children, as both are SIS dependants. Lorna is not a SIS dependant, but part of his super could be paid to his estate and then distributed to Lorna as a tax-free death benefit lump sum via his will, as she is a death benefits dependant for tax purposes. His 16-year-old daughter can receive a tax-free lump sum benefit, as she is a death benefits dependant. However, the lump sum paid to his 23-year-old daughter is not tax-free, as she is not a tax dependant.
What is an Interdependency relationship?
The definition of an interdependency relationship is the same for both SIS and Tax purposes. The deceased member and the person:
- shared a close personal relationship
- lived together
- either or both of them provided financial support, domestic support and personal care
It is not merely a relationship between friends, flatmates, or a child and a parent, but rather a more complex dependency and commitment to a shared life, often demonstrated in the face of illness or injury. If the parties are unable to live together due to a disability or spending some time in jail, it will not necessarily mean the relationship will fail the test as an interdependency relationship.
Example from the ATO website – evidence to support interdependency
Alix makes an application for compassionate release of super to modify her home to accommodate her adult son’s special needs, which come from a severe disability. To support her application that her son is a dependant, both Alix and her son provide:
- separate statutory declarations that
- they have shared and continue to share a close and personal relationship for over 2 years
- they have lived together for more than 2 years
- they provide domestic support in the form of cleaning and cooking and emotional support to each other, given they have no other living relatives
- due to her son’s disability, he can’t live on his own, so the current situation will be permanent
- a driver’s license or other personal identification confirming they live at the same address
- copies of bank statements showing that Alix has been providing financial support of $100 a week to her son for the last 8 years.
As they live together, Alix is also able to show that she pays for all bills and everyday expenses for her and her son.
In this case, we are satisfied that an interdependency relationship exists between Alix and her son.
Example from the Explanatory statement Select Legislative Instrument 2005 No. 261
Two elderly sisters, June and Betty, were living together in an interdependency relationship at the time that June was sentenced to two years in gaol. During that period, they were not able to live together, or provide each other with financial support, domestic support, or personal care. They did, however, maintain their close personal relationship. June and Betty were still in an interdependent relationship during the period that June was in gaol because, in the absence of evidence to the contrary, it would be reasonable to assume that if she was not in gaol, they would have continued to meet the definition as they did prior to her incarceration.
What is financial dependency?
Financial dependency is defined as the ability to meet a person’s financial needs to maintain their “normal standard of living”. Grandparents paying private school fees for their grandchild may not necessarily meet that criterion. The question is whether withdrawing that financial support would have a significant impact on the grandchild’s normal everyday life. The ATO are taking a strict view on what financial dependency is.
Who can receive my death benefits if I have no SIS dependants?
The SIS regulations allow death benefits to be paid to the deceased member’s legal personal representative (their estate). If the SMSF trustee is unable to find any SIS dependants, or there is no estate, the death benefits can be paid to another individual, but not to an entity. This means the deceased parents, or a brother or sister, may possibly be paid the death benefit, even though they are not SIS dependants.
However, not all SMSF deeds allow a benefit to be paid to a non-dependant in the case of an SMSF members death. It is crucial to ensure the trust deed does not limit what is allowable under the SIS regulations.
Example – paying a death benefit to a non-dependant
Two friends, James and Fred, were members of an SMSF. James, unfortunately, had a car accident and died on 10 June 2026. James was unmarried and in no de facto relationship, and had no children, brothers, or sisters. Fred made extensive enquiries and placed a notice in the paper seeking any SIS dependants of James. James did not have an estate, and no SIS dependants were found. James’s mother was still alive, so Fred determined the death benefits could be paid to her.
Taxation of a death benefit lump sum payment
The following is a summary of applicable tax:
| Relationship to the deceased | Tax-free component | Taxed Component | Untaxed component
(rare in an SMSF) |
| Death Benefits Dependant | Nil | Nil | Nil |
| Non-Tax Dependants | Nil | Maximum of 15% + Medicare (2%) | 30% + Medicare (2%) |
Hint – The SMSF does not withhold any PAYG on payments made to the trustee of the deceased’s estate. However, the deceased’s estate pays the relevant tax liability depending on the status of the beneficiary.
Taxation of a death benefit pension
A death benefit pension can be paid only to an eligible recipient, generally the spouse and minor children.
| Age of member on death | Age of pensioner | Tax treatment |
| Aged 60 or over | Any age | Nil |
| Under 60 | Aged 60 or over | Nil |
| Under 60 | Under 60 | Pension is taxed at MTR plus Medicare (2%) on taxed component and 15% tax offset – nil tax on tax free component |