Claiming Deceased Superannuation

As superannuation is not legally considered part of a deceased estate, claiming deceased superannuation benefits is something that needs to be handled separately.

Contrary to what many people assume, death benefits from a super fund are not distributed to the beneficiaries named in the will along with the assets of the estate.

What is Superannuation?

Superannuation is a compulsory payment made by an employer on behalf of an employee. This money is set aside in a super fund so that upon ceasing employment, the employee will have enough money for a comfortable retirement.

Upon somebody’s death, superannuation funds can often contain several hundred thousand dollars, especially if the deceased was still working at the time of their passing.

What are Superannuation Death Benefits?

superannuation death benefit is a payment made up of any money held in the deceased’s super account, plus payouts from any associated insurance policies.

When claiming deceased superannuation, you will be claiming the superannuation death benefit.

A death benefit from a superannuation fund must either be paid out as a lump sum or as an income stream, but it cannot be left in the super fund after death.

Can You Put Super in Your Will?

Typically, super can’t be included in your will. This is because a will only covers assets that you personally own like your house, car, savings and personal heirlooms.

Because your super is held for you in trust by your super fund trustee, it is governed by different laws and is not covered under laws relevant to wills and estates.

Binding vs Non-Binding Nominations

On joining a superannuation fund, members receive a nomination form which allows them to name their preferred beneficiaries.

Members can choose to make a binding nomination, a non-binding nomination, or no nomination.

If the deceased has named a beneficiary in a ‘binding death nomination’ then the trustee is legally bound to follow their instructions, as long as the nomination is deemed valid.

Remember that a binding nomination will often have an expiry date, usually three years, before you must re-sign the document and lodge it with your super fund.

If the deceased has made a non-binding nomination, the trustee will this into account but may decide to go against it, usually for legal reasons.

Who Can Receive the Super Benefit When a Member Dies?

When a member of a super fund dies, the trustee of the deceased’s superannuation fund must pay a death benefit by following the fund rules.

Death benefits can usually only to be paid to the following people:

  • The member’s spouse (either by marriage or de facto)
  • The member’s child or children (including adopted and step-children)
  • Any person who was in a relationship of interdependency with the deceased (for example a same-sex relationship or siblings living together)
  • Any person who was financially dependent on the deceased
  • The executor or administrator of the estate

Superannuation law states that a binding nomination is valid if it:

  • Nominates an eligible person and the shares they should receive
  • The Shares allocated add up to 100%
  • Is in writing, is signed and is witnessed by two people over the age of 18 who are not named as beneficiaries to the super 
  • Is no more than three years old, or has been renewed in the last three years

Death Benefits and Tax

Whether your death benefits will be subject to tax depends on whether you super is paid out to beneficiaries as a lump sum, income stream or combination of both. Different tax treatments will also be applied depending on whether your recipients are ‘tax dependants’.

Tax dependents include the deceased’s spouse or de facto, children under the age of 18 and any other financial dependents.

Any lump-sum payment made to a tax-dependant will not be taxed, whereas lump sum payments made to other parties may be subject to tax.

When the death benefit is paid as an income stream, whether the payment is taxed will depend on the ages of both the deceased and the beneficiary.

It is important when claiming deceased superannuation that you talk to your accountant to make sure you understand the tax implications related to any death benefit you may have received. This will ensure you don’t get caught out come tax time.

claiming deceased superannuationWhat laws apply when claiming deceased superannuation?

When dealing with your super after death, your super fund has to follow specific legislation and the trust deed of your super fund.

The legislation that Australian Super funds follow is:

  • The Superannuation Industry Supervision (SIS) Act 1993
  • The Income Tax Assessment Act (ITAA) 1997

Steps in claiming deceased superannuation death benefits

As an executor or next of kin of a super member, you have the right to contact the deceased’s super fund to determine if you are eligible to receive payment.

Most super funds have somewhat steps when claiming deceased superannuation death benefits:

  1. Contact the super fund in question and explain your situation
  2. Most super funds will then assign you a case manager who will ask some initial questions to determine your eligibility to claim death benefits. 
  3. If your claim is deemed eligible your case manager will send you a selection of forms to fill out and will request copies of any other related documents that may assist in your claim
  4. The trustee then assesses your application to determine whether the death benefit is payable. At this stage, they may need to gather more information about the member.
  5. A decision is then made, and all people who made a claim are notified, with 28 days to object
  6. Once all objections have been dealt with, payment of the deceased superannuation can then be made

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