Superannuation death benefit claims

What is a superannuation death benefit?

When a superannuation fund member dies, their account balance, including any life insurance held inside super, becomes a death benefit. This benefit is paid out by the fund according to the fund's rules, the member's nomination, and applicable legislation.

Importantly, super does not automatically form part of the deceased's estate and is not distributed according to the will. The fund's trustee makes the decision about who receives the benefit, subject to any valid binding nomination.

Who can receive a superannuation death benefit?

Super death benefits can be paid to a dependant of the deceased. A dependant includes a spouse or de facto partner (including same-sex partners), a child of any age, or a person who was financially dependent on the deceased at the time of death.

If there is no dependant, the benefit is typically paid to the legal personal representative of the estate, which means the executor or administrator, for distribution through the estate.

The tax treatment of the benefit differs depending on the relationship between the deceased and the recipient, and whether the recipient is classified as a tax dependant. This is covered below.

What is the difference between binding and non-binding nominations?

The difference is what the trustee has to do with your instruction: the fund must follow a valid binding nomination, but it only has to consider a non-binding one. A binding death benefit nomination (BDBN) is a written instruction the member made to the fund, directing who should receive the benefit. If the nomination is valid, the fund's trustee must follow it, subject to the nominated person being eligible.

BDBNs expire after three years unless the fund offers a non-lapsing binding nomination. If the nomination has expired, or if the nominated person is no longer eligible (for example, if they have also died), the fund's trustee exercises discretion.

A non-binding nomination is an expression of the member's preference, not a binding instruction. The trustee takes it into account but is not required to follow it. If there is no nomination at all, the trustee decides entirely based on their assessment of the circumstances.

Contact the fund early to ask whether a binding nomination exists and whether it is current. Do this before taking any other steps.

How do I make a superannuation death benefit claim?

Contact the super fund's member services team as soon as possible after the death. Most funds have a dedicated bereavement line or deceased estates team. You will need to provide a certified copy of the death certificate and your own identification. The fund will send you a claim form and advise what supporting documentation is required.

Typical documents requested include the certified death certificate, the claimant's proof of identity, evidence of the relationship to the deceased (such as a marriage certificate or proof of de facto relationship), and sometimes a statutory declaration. The fund will tell you exactly what they need.

If there are multiple potential claimants, or if the trustee is exercising discretion, the fund may ask each claimant to submit a statement about their relationship with and financial dependence on the deceased.

How quickly can superannuation death benefit funds be released?

Where there is a valid binding nomination and a straightforward claim, funds can sometimes be released within a few weeks. More complex situations, including those where the trustee is exercising discretion or where claims are being made by multiple parties, can take several months.

Many super funds can release a portion of the death benefit early to help cover funeral costs, even before the full claim is processed. Ask the fund specifically about their hardship or early release provisions for funeral expenses. Having the funeral invoice ready helps.

What about life insurance held inside super?

Many Australians hold life insurance through their superannuation fund, often without realising it. When making a death benefit claim, ask the fund whether the deceased held any insurance cover and whether it forms part of the death benefit.

The fund will assess whether the claim meets the insurance policy's conditions, which may include a waiting period check and verification that the policy was active at the time of death. The insurance proceeds, if payable, are added to the account balance and paid out as part of the total death benefit.

What happens if there is no superannuation nomination?

If the deceased made no binding nomination, the fund's trustee decides who receives the benefit. The trustee will consider the claims of dependants and the legal personal representative of the estate.

The trustee's decision is legally binding and may not reflect what the deceased would have wanted. This is why having a current binding nomination in place matters so much, and why it is worth checking this for your own super as part of end-of-life planning.

If you believe the trustee's decision is incorrect or unfair, you can lodge a complaint with the fund. If unresolved, the Australian Financial Complaints Authority (AFCA) at afca.org.au handles superannuation disputes at no cost.

What tax applies to superannuation death benefits?

Whether tax applies to a super death benefit depends on who receives it and the composition of the super balance.

Payments to a tax dependant, which includes a spouse or de facto partner, a child under 18, and anyone financially dependent on the deceased, are generally tax-free regardless of whether the benefit is paid as a lump sum or a pension.

Payments to a non-tax dependant, such as an adult child who was not financially dependent, may include a taxable component. The taxed element is generally taxed at up to 15 percent (plus Medicare levy). An untaxed element, which commonly arises where life insurance is held inside the super account, can be taxed at up to 30 percent (plus Medicare levy). The fund will provide a payment summary showing the tax breakdown, and an accountant can explain what applies to your situation.

Before accepting a payment, consider speaking with a financial adviser or accountant about the tax implications, particularly if the benefit is large or if you have options about how it is structured. The ATO provides detailed guidance on how superannuation death benefits are taxed at ato.gov.au.