Estate Planning in Australia: Why 2026 Is the Year to Get Your Affairs in Order

The Estate Planning Gap in Australia

Most Australians know they should have a will. Far fewer actually have one that’s current, comprehensive, and properly accounts for their superannuation, trust structures, and the tax implications of passing on their wealth.

The numbers tell the story. Research from the NSW Trustee and Guardian found that approximately 50% of Australian adults don’t have a valid will. Among those who do, a significant proportion haven’t updated it in over five years, meaning it likely doesn’t reflect their current circumstances, assets, or family situation.

This matters more in 2026 than in previous years for three specific reasons:

1. Superannuation balances have grown significantly. The average super balance for Australians aged 60 to 64 is now approximately $402,000 for men and $318,000 for women (ABS data). For many households, super is the largest or second-largest asset. Yet super doesn’t automatically pass through your will.

2. Division 296 changes the tax treatment of large super balances from 1 July 2026. For anyone with a total super balance above $3 million, the new 15% tax on earnings above that threshold changes the calculus around death benefit planning, pension structuring, and intergenerational wealth transfer.

3. Property values are at record levels. With the national median house price crossing $1 million in early 2026, even modest family homes now represent significant wealth. How that wealth transfers (or doesn’t) depends entirely on your estate plan.

This guide covers the core components of an Australian estate plan, with a focus on the practical steps and specific issues that matter right now.

Component 1: Your Will

Why a Will Isn’t Optional

A will is the foundation of any estate plan. It names your executor (the person who carries out your wishes), specifies who receives your assets, and can establish testamentary trusts for the benefit of your dependants.

Without a will, your estate is distributed according to your state or territory’s intestacy laws. These laws are rigid and may not match your wishes. For example:

NSW intestacy rules (Succession Act 2006):

• If you have a spouse and no children: spouse receives the entire estate
• If you have a spouse and children (all from the same relationship): spouse receives the entire estate
• If you have a spouse and children from a previous relationship: spouse receives personal effects, a statutory legacy of $350,000 (indexed), and 50% of the remainder. Children share the other 50%.

Victoria intestacy rules (Administration and Probate Act 1958):

• If you have a spouse and no children: spouse receives the entire estate
• If you have a spouse and children (all from the same relationship): spouse receives the entire estate
• If you have a spouse and children from a different relationship: spouse receives personal chattels, a statutory legacy of $451,909 (2025-26 indexed amount), and one-half of the residue

These rules don’t account for:

• De facto partners in all situations (recognition varies by state and relationship length)
• Stepchildren (generally no automatic entitlement under intestacy)
• Specific wishes about who receives particular assets
• Charitable bequests
• Business succession

What a Good Will Covers

A comprehensive will in Australia should address:

Executor appointment: Choose someone you trust who is capable of managing the administrative and financial complexity of your estate. Consider a backup executor in case your first choice is unable or unwilling to act. For complex estates, a professional executor (solicitor or trustee company) may be appropriate.

Specific gifts: Particular assets you want to go to particular people (e.g., “my watch collection to my son James”). Keep specific gifts to a minimum as they can create problems if the asset no longer exists at the time of your death.

Residuary estate: Everything else, after debts, expenses, and specific gifts are paid. This is typically the bulk of the estate and should be distributed according to a clear formula (e.g., “equally between my children” or via a testamentary trust).

Guardianship of minor children: If you have children under 18, your will should nominate a guardian. Without this, the Family Court decides.

Testamentary trusts: For estates of any significant value, testamentary trusts provide tax advantages and asset protection for beneficiaries (see below).

Digital assets: Include provisions for access to digital accounts, cryptocurrency holdings, and online businesses. This is increasingly important and widely overlooked.

The Marriage and Divorce Trap

In most Australian states, marriage automatically revokes a prior will (with some exceptions for wills made “in contemplation of marriage”). This means if you marry and don’t make a new will, you die intestate regardless of any previous will you had.

Divorce doesn’t revoke a will in all states, but it does affect provisions for the former spouse in most jurisdictions. In NSW, for example, any gift to a former spouse in a will made before the divorce is treated as if the spouse predeceased the testator.

If you’ve married, divorced, separated, or entered a de facto relationship since your last will, you need to review it immediately.

Component 2: Superannuation Death Benefits

The Problem: Super Doesn’t Follow Your Will

This is the single most common estate planning mistake in Australia, and it catches families off guard at the worst possible time.

Your superannuation is held in trust by your super fund (whether it’s a retail fund, industry fund, or SMSF). When you die, the super fund trustee decides who receives your death benefit, not your executor. Your will has no control over your super unless you specifically direct your super to be paid to your estate.

The fund trustee is required to pay your death benefit to one or more of your eligible dependants, or to your estate. Eligible dependants under superannuation law are:

• Your spouse (including de facto and same-sex partners)
• Your children of any age
• Anyone in an interdependency relationship with you
• Anyone who was financially dependent on you at the time of your death

The trustee exercises discretion in choosing among these dependants, which can lead to outcomes that don’t match your wishes.

Binding Death Benefit Nominations

A binding death benefit nomination (BDBN) removes the trustee’s discretion and directs them to pay your super to specific people or to your estate. This is the mechanism that gives you control.

Key rules for BDBNs:

• Must be in writing and signed by two witnesses (who are not nominated beneficiaries)
• Must nominate eligible dependants or the member’s legal personal representative (estate)
• In most regulated funds, a BDBN lapses after three years and must be renewed (some funds now offer non-lapsing BDBNs)
• In an SMSF, the trust deed determines whether BDBNs are available, whether they lapse, and the requirements for validity

Tax implications of death benefit payments:

The tax treatment of super death benefits depends on who receives the payment and the components of the benefit:

For many Australians, especially those with large super balances, the distinction between paying death benefits to a spouse (tax-free) versus adult children (potentially taxable) can mean a difference of tens of thousands of dollars.

Example: A super balance of $800,000 comprising 20% tax-free component ($160,000) and 80% taxable component ($640,000). If paid to an adult child (non-tax dependant), the tax on the taxable component would be approximately $640,000 x 17% = $108,800. If paid to a spouse, the entire amount is tax-free.

Reversionary Pension Nominations

If you’re already drawing an account-based pension from your super, you can nominate a reversionary beneficiary (typically your spouse). On your death, the pension continues to be paid to your spouse without the balance re-entering the accumulation phase. This preserves the tax-free pension treatment and avoids the need for the balance to be counted against your spouse’s transfer balance cap (for 12 months).

This is distinct from a BDBN and should be considered alongside it, particularly for couples in retirement.

Component 3: Testamentary Trusts

Why Testamentary Trusts Are Powerful in Australia

A testamentary trust is established by your will and comes into existence after your death. They are particularly valuable in Australia for two reasons:

Tax advantage for minor beneficiaries: Under normal tax rules, unearned income received by children under 18 is taxed at penalty rates (up to 66% on amounts over $416). However, income from a testamentary trust is taxed at normal adult marginal rates. This means each child can receive up to $18,200 tax-free (the tax-free threshold) and a further $26,800 at 16% (the first marginal rate band from 1 July 2026).

For a family with three children, this creates up to $54,600 per year in tax-free income from the testamentary trust, potentially saving over $20,000 in tax annually compared to distributing the same income outside a testamentary trust.

Asset protection: Assets held in the testamentary trust are controlled by the trustee, not owned by the beneficiary. This provides protection against the beneficiary’s creditors, relationship breakdowns, and poor financial decisions.

When Testamentary Trusts Make Sense

Testamentary trusts are worth considering if:

• You have minor children or grandchildren
• Your estate is worth more than $500,000 (roughly the point where the tax savings justify the setup and ongoing costs)
• You have beneficiaries who are financially vulnerable (disability, addiction, poor money management)
• You want to protect inherited assets from beneficiaries’ future relationship breakdowns
• Your estate includes assets that generate ongoing income (rental properties, share portfolios, business interests)

Cost Considerations

A will with testamentary trust provisions typically costs $3,000 to $6,000 to prepare, compared to $500 to $1,500 for a simple will. The ongoing cost of administering the testamentary trust after your death includes annual tax returns ($500 to $1,500 per year) and potentially a corporate trustee company ($310 ASIC fee plus compliance costs).

For an estate worth $1 million or more with income-generating assets and minor beneficiaries, the tax savings from a testamentary trust can easily exceed $10,000 per year, making the cost of establishment a clear investment.

Component 4: Powers of Attorney and Advance Directives

Enduring Power of Attorney (Financial)

An enduring power of attorney (EPOA) appoints someone to manage your financial and legal affairs if you lose capacity. Unlike a general power of attorney, it continues to operate (or in some states, only activates) when you lose the ability to make decisions yourself.

Each state has its own legislation:

Without an EPOA, if you lose capacity your family must apply to a state tribunal for an administration order. This process typically takes 2 to 6 months, costs $1,000 to $5,000 in legal and tribunal fees, and gives the family less control than an EPOA. During that period, no one can legally access your bank accounts, sell assets, or make financial decisions on your behalf.

Medical/Health Directives

Separate from financial powers, you should have:

• Enduring guardianship (NSW) / Medical treatment decision maker (VIC) / Advance health directive (QLD): Appoints someone to make medical and lifestyle decisions if you lose capacity
• Advance care directive: Documents your wishes about medical treatment, end-of-life care, and organ donation

These documents are state-specific and should be prepared alongside your will and EPOA.

Component 5: The Division 296 Impact on Estate Planning

What’s Changed

Division 296, which takes effect from 1 July 2026, introduces an additional 15% tax on superannuation earnings attributable to the portion of your total super balance that exceeds $3 million. This applies to individuals (not funds) and is calculated based on the change in your total super balance over the financial year, adjusted for contributions and withdrawals.

Estate Planning Implications

For individuals with super balances approaching or exceeding $3 million, Division 296 creates new considerations:

Accelerated withdrawals: Some advisers are recommending that individuals above the $3 million threshold consider withdrawing amounts in excess down to just above $3 million, investing outside super where the asset protection and tax benefits no longer outweigh the Division 296 cost.

Death benefit timing: If a member dies with a balance above $3 million, Division 296 tax will apply to earnings in the year of death (up to the date of death). The interaction between Division 296, death benefit taxation, and the transfer balance cap creates complex planning opportunities that should be modelled with a financial adviser.

SMSF cost base reset: For the first year only (FY2026-27), SMSF trustees can elect to reset the cost base of fund investments to market values as at 1 July 2026. This election is relevant for Division 296 calculations and should be considered as part of estate planning for SMSF members.

Pension reversion: Where both spouses have balances near or above $3 million, the reversion of a pension on the first death can push the surviving spouse well above the threshold, compounding the Division 296 impact. In these cases, directing death benefits to adult children (accepting the 17% tax on the taxable component) may be more tax-effective overall.

The Estate Planning Checklist for 2026

Use this as a practical guide to assess where you stand:

If more than two items on this list are unchecked, you should prioritise getting professional advice this quarter.

What It Costs vs What It Saves

The cost of a comprehensive estate plan is a fraction of a single year’s tax savings from proper structuring. The cost of not having one can be measured in family conflict, tax leakage, and outcomes that don’t reflect your wishes.

Find a Financial Adviser or Accountant

Estate planning sits at the intersection of law, tax, and financial planning. A financial adviser can model the tax implications of different death benefit strategies, while an accountant can advise on trust structures and Division 296 planning. Find a verified financial adviser on WealthWorks or find an accountant to get started.