Here’s the latest in a series of articles from the timber industry super fund, First Super, with tips to help you make the most of your super. This time the focus is on the important step of letting your super fund know who you want to receive any benefits in the event of your death.
Step 5 – Nominate Benficiaries
Many people think that their super balance is an asset that becomes part of their estate when they die, just like their home or personal effects. But this isn’t always the case!
Super benefits (your account balance and any insurance inside super) are treated separately from your other assets and don’t go automatically to your estate in the event of your death.
Super fund trustees must follow superannuation and tax laws to decide who is eligible to receive the super account balance and any insurance payment – that is, your beneficiaries.
Look after the people you care about by nominating beneficiaries, which tells your super fund exactly who you want to receive your benefits if the worst were to happen.
Who Can I Nominate?
Who you can nominate is governed by the Superannuation Industry (Supervision) Act 2013 – known as “the SIS Act”.
This law is very specific about who can receive a deceased member’s superannuation benefits. They can be paid to one or more of your “dependants” or your legal personal representative, who would distribute your assets following the instructions detailed in your will.
A “dependant” for SIS Act purposes is generally:
- a child of any age
- a spouse (including a de facto or same sex partner/spouse)
- a financial dependant, or
- a person with whom you have an “interdependency relationship” (for example, if you live together, or one of you provides the other with domestic support and personal care).
Super funds are required by law to ensure that any nominated beneficiary meet one of these definitions before releasing any funds.
Are There Any Tax Issues With Who I Leave My Benefits To?
There may be. The Australian Taxation Office (AT) applies a different definition of a dependant to that of the SIS Act which can have a tax implications.
One example is an adult child who is not financially dependent or doesn’t have an interdependency when aged 18 or over. Although the adult child meets the SIS Act definition, they do not meet the ATO definition, so any superannuation and death benefit payments will be taxed at 20% plus the Medicare levy.
As the tax laws are quite complex, learn more about the ATO’s treatment of death benefits by visiting the ATO website or getting financial advice.
What Are My Nomination Options?
You also have the option of two types of nomination.
A Non-Binding Nomination
This is a request for a super fund trustee to pay your benefit in a certain way in the event of your death. It is not legally binding, but your preference is taken into account by your super fund.
The Trustee must follow the law in working out who should receive a death benefit. Your benefit will be paid to those considered to be financially dependent on you and, in some cases, this may not be the person or people nominated.
A Binding Nomination
This is an instruction to the Trustee about who is to receive your benefit in the event of your death, which must be signed by two witnesses.
Your super fund trustee is bound by law to follow this instruction, provided that the nomination is legally valid at the time of your death and the person(s) nominated qualify for payment under the law when the benefit is paid.
A binding nomination is valid for three years and overrides any non-binding nomination you may have submitted previously.
How Do I Nominate Beneficiaries?
Each super fund will have its own process for nominating beneficiaries, but generally you will need to complete a “nomination of beneficiary form”, sign it, and return it to your fund.
If you’re a First Super member, download our Nomination of Beneficiary Form from firstsuper.com.au/forms or request one from our Member Services Team.
You can nominate more than one person to receive a share of your benefits – you just specify the percentage of your benefit that you would like each person to receive.
That being said, the important thing to remember is that in the superannuation insurance law world you MUST nominate someone who meets its definition of a “dependant”. If you don’t, then your wishes may not be fulfilled and the super fund trustee may need to undertake investigations to ultimately decide who receives your benefits.
Looking for Expert Help or Advice?
First Super has a team of Business Development Managers and Member and Employer Services Coordinators based around the country. They can visit you at your workplace to help to explain your options in super and help with completing forms, as well as providing general advice and running information and education sessions.
For personal financial advice, you can speak to our authorised Financial Planners. First Super members can access intrafund advice at no additional cost. Comprehensive financial advice is provided on a fee-for-service basis, so you’ll know what it will cost you up front.
To book a call or meeting, or for any other super queries, contact our Member Services Team on 1300 360 988 or email@example.com.
This article was issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as Trustee of First Super (ABN 56 286 625 181). It may contain general advice that has been prepared without taking into account your objectives, financial situation or needs. You should consult the Product Disclosure Statement (PDS) before making any investment decision. Content was accurate at the date of issue, but may subsequently change. Please contact First Super’s Member Services Team on 1300 360 988 for updated information or to obtain a copy of the PDS.