The Government's simplified superannuation rules have created a number of anomalies in the way that death and Total and Permanent Disability Cover (TPD) are taxed said global consultant group Watson Wyatt.

Adult children might have to pay 16.5 per cent tax on a parent's retirement benefit, depending on when the parent died and whether their benefits were still in the super system, Watson Wyatt director and head of the actuarial and employee consulting benefits practice Brad Jeffrey said.

If a member aged over 60 takes $250,000 out of the super system and gives it to the children, then no tax is applied. If the person dies, non dependents could face a tax of up to 16.5 per cent on the benefit or $41,250, he said.

"The variation in the tax treatment of death benefits relative to retirement benefits is further compounded by the rules defining who is entitled to anti-detriment payments," Jeffrey said.

He cites another example where the research showed how a $250,000 death benefit could lead to a net benefit of between $208,750 and $272,059, depending on the beneficiaries' classification as a dependent.

"Watson Wyatt Australia believes that a consistent approach would have made both death benefits and TPD benefits tax-free, to be treated the same as retirement benefits paid after 60," he said.

The findings back up a report released in March by finance specialist William Buck chartered accountants which said, the new superannuation rules will introduce a death tax on parents who own property through self-managed superannuation funds.

On taking possession of the property, children face the immediate tax liability of up to 16.5 per cent of the property's value, William Buck chartered accountants director Anna Carrabs said.