SMSF Death Benefits for Minor Children

When a member of a self-managed superannuation fund passes away, trustees must carefully manage death benefits. Minor children often need special consideration under superannuation and tax law.

Who is a Death Benefits Dependant

A death benefits dependant is determined at the time of the member’s death. This includes:

• Spouse or de facto spouse

• Former spouse or de facto spouse

• Child under 18 years old

• Someone in an interdependency relationship

• Any person financially dependent on the deceased

Tax Treatment

Death benefits for minor children in a self-managed super fund are generally tax-free if the child was under 18, or under 25 and financially dependent at the time of death. This includes any investment growth in the fund. Benefits can be paid as a lump sum or as an income stream (child pension). Even if the child is no longer a dependant at payment, the benefit remains tax-free.

Trustee Responsibilities

Superannuation law requires trustees to pay death benefits as soon as practicable. Delays can create compliance issues, audit concerns, or inquiries from the Australian Taxation Office. Trustees should document all actions and seek advice if payment is delayed or complex.

Practical Steps

1. Confirm the child’s tax-dependent status at death

2. Calculate the total balance including growth

3. Choose lump sum or child pension payment

4. Pay promptly and document the process

5. Seek professional guidance if needed

Conclusion

Death benefits for minor children in an SMSF are tax-free if the child was under 18 or under 25 and financially dependent at death. Payment can be a lump sum or child pension, and remains tax-free even if the child is older. Timely, compliant payment protects the fund and beneficiaries. iCare Super helps trustees manage death benefits efficiently.