Kerri Pike was killed along with two experienced instructors.
She had been doing a tandem dive with one of the instructors.
Paramedics and police were called to Mission Beach, a popular skydiving spot about 140km (87 miles) south of Cairns.
It is believed her husband Alister, a former local councillor, and children had gifted the skydive as a 50th birthday present.
'You could see one chute was tangled and it wasn't opening, ' the man who chose to go unnamed said.
In a statement issued this evening, Skydive Australia said it had suspended operations at Mission Beach following the tragedy.
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