Superannuation Death Benefits
One of the most important decisions you make when joining a superannuation fund has nothing to do with investment choices. Superannuation is a non-estate asset: its distribution is a separate consideration from the terms in your Will. It is therefore important that you consider how you appoint your superannuation death benefits beneficiaries.
Who can receive your superannuation death benefits?
Superannuation rules and regulations determine how your super is distributed consequent upon your death. The Superannuation Industry Supervision (SIS) legislation provides compliance guidance in this matter. Following those rules ensures prompt payment to your intended beneficiaries. Superannuation death benefits are able to be paid to –
- your superannuation dependants, or
- to your estate.
Superannuation dependants include:
- Your spouse (including a de facto spouse),
- Your children (regardless of age),
- A person with whom you have an interdependency relationship*,
- A person who is financially dependent on the member (eg. family relative), and
- Your estate.
* An interdependency relationship applies where two persons, whether or not related by family:
- Have a “close personal relationship”; and
- Live together; and
- One or each of them provides the other with financial support; and
- One or each of them provides the other with “domestic support” and “personal care”.
The definition can also be satisfied if the two persons have a “close personal relationship” but are unable to satisfy the above requirements is because either or both of them suffer from a physical, intellectual or psychiatric disability.
Death benefits paid to a tax dependant are tax free. A non tax dependant pays tax at 15 per cent on the taxable component of the benefit. The remainder of the super death benefit is tax free.
Superannuation death benefit beneficiaries who are non-tax dependants can no longer receive that benefit as a pension. Non-tax dependants include adult children, unless they suffer a permanent disability, or are under 25 and financially dependant.
How can you ensure your superannuation death benefits go to the right person?
Super fund beneficiary nomination is achieved by formal notification to the fund trustee. According to the trust deed of the superannuation fund, the nomination will be one of two categories:
- Discretionary Nomination. This is only a guide for the trustee of your superannuation fund. They will have the ultimate discretion as to which dependant will receive your super. Whilst not bound by your request, the trustee may take any beneficiary nomination you make into consideration.
- Binding Death Benefit Nomination. This is a legally binding nomination as to which dependant(s) you want to receive your superannuation death benefits. This will assure that the superannuation fund trustee acquits your superannuation death benefits to your nominated beneficiaries. Valid binding death benefit nominations are to be signed by you, as nominee, and witnessed by two others. Those witnesses should be persons who are not beneficiaries to the nomination. Binding death nominations are usually only valid for three years. Your super fund will usually write to you before the nomination expires to remind you to update it. (Some trustees have a less formal process to facilitate continuation of the nomination beyond the usual expiry date.)
What happens if I do not have any dependants?
Should you have no dependants as defined under superannuation rules and you want someone else such as –
- a sibling, or
- a charity,
to receive your superannuation, consider nominating your estate as the preferred beneficiary of your superannuation entitlements. Your superannuation will then be distributed under the terms of your Will.
Why is ongoing review important?
We recommend reviewing superannuation death benefit beneficiary nominations regularly. This will ensure that the people you wish to benefit in the event of your demise are currently nominated. We also recommend that you include –
- full details of your beneficiaries,
- their relationship to you, and
- their full name and their address,
in your relevant records, such as your estate folder.
Promptly informing your superannuation fund trustee of any changes to your beneficiaries (or changes to their personal details) will make the task of distributing your super much less complex for all involved.
Estate Planning
Professional advice should always be sought from your financial adviser and an estate planning specialist on complex matters such as –
- Wills and Estate Planning,
- superannuation death benefits,
- in the light of your personal circumstances.
Professional advice from the experienced advisers at Continuum Financial Planners Pty Ltd is readily available. To arrange a meeting with one of our experienced team –
- phone 07-34213456, or
- at your convenience, use the linked Book A Meeting facility.
Your best interests from a wealth management point of view will be served by our mantra –
‘we listen, we understand; and we have solutions’.
(This article was first posted by us in March 2010. It has occasionally been refreshed/ updated, most recently in February 2025.)
