Mastering Superannuation Death Benefit Claims
If you've ever worked in Australia, chances are you have a superannuation fund into which your employer regularly contributes. In the unfortunate event of a superannuation fundholder's demise, their beneficiary has the right to claim the death benefit, encompassing any additional funds invested. This guide breaks down the process of claiming a superannuation death benefit.
When a superannuation fund member passes away, the total fund balance, along with any supplementary benefits from other products or services, is disbursed to their beneficiary. This payment is termed a superannuation death benefit.
Some individuals may have multiple superannuation funds. If you're claiming superannuation after someone's demise, you must contact every super fund in which the deceased had investments.
To initiate the superannuation death benefit claim, you need to ascertain:
- All superannuation accounts held by the deceased.
- The nominated beneficiary or beneficiaries in each fund.
- Additional services in the superannuation fund that may now be claimed, such as life insurance.
The superannuation death benefit doesn't form part of the estate, as the fund is owned by a trustee (the company where the superannuation fund is held), not the fund member. Consequently, super funds cannot be bequeathed in a will.
Upon a super fund member's demise, trustees distribute the superannuation according to the terms of their deed. Beneficiaries of the super fund are nominated directly through the fund, separate from the estate beneficiaries.
A death benefit is typically paid to one or more of the deceased's dependants, like a spouse or children, or a legal representative such as the executor or administrator of the estate.
- Binding Beneficiaries: These are nominated in writing to receive the superannuation benefit. If binding beneficiaries are contested, professional advice is crucial to help navigate a review with the superannuation fund.
- Non-binding Beneficiaries: If only a non-binding beneficiary is nominated, the super fund (trustee) assesses the fund member's relationship with the nominated person at the time of death. The trustee then decides to release the death benefit to the nominated non-binding beneficiary, another dependant, or directly to the deceased estate.
Superannuation funds review the deceased person's accounts and any held insurance covers. They will outline the required documentation, typically a death certificate and will, to establish your authorization to claim the deceased person's superannuation.
To make a claim, the beneficiary must contact the relevant superannuation funds, notifying them of the fund member's death. The super fund will explain the processes for initiating the superannuation death benefit payment request and the necessary documents.
While processes may vary, the general steps include:
- Notify the superannuation fund of the death, providing a certified copy of the death certificate.
- Request details of nominated beneficiaries, fund balances, and any other payable amounts.
- Complete required forms and apply for the death benefit payment.
- The superannuation assesses the deceased's relationship to the beneficiaries.
- The fund advises the outcome and to whom the superannuation death benefit will be paid.
- If needed, appeal the decision.
- If required, appeal the decision to the Superannuation Complaints Tribunal (SCT) within 28 days.
- The superannuation fund disburses the death benefit.
Understanding nominated beneficiaries early on is crucial to determine if the superannuation payment forms part of the deceased estate. Executors must calculate the total death benefit value and add it to the Inventory of Assets and Liabilities.
Checking for any 'lost super' (unclaimed super) the deceased person might have is advisable. This can be done by filling out the ATO Searching for lost and unclaimed super form and mailing it with certified copies of the death certificate and, if available, the will; Grant of Probate; or Letter of Administration.
Superannuation death benefits paid to dependants are tax-free. However, tax is incurred on benefits paid to the deceased's children aged 18 or above who were not financially dependent at the time of death. Learn more about tax on deceased estates in our article How to lodge a tax return for a deceased estate.