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Nominating beneficiaries for your super

Who Can I Nominate To Receive My Super?

Super is the second largest asset for most Australians, after their family home. To give you certainty that your superannuation benefits will go to the right people when you die, you can put a binding nomination in place.

You can only nominate your estate, or a “dependant” under super law to receive your death benefit from super. Under super law “a dependant” is:

  • Your spouse (including a de facto spouse);
  • Your children (including an adult child, an adopted child and a step child);
  • Anyone who is financially dependent on you at the time of your death; or
  • Anyone with whom you have an interdependency relationship at the time of your death.

If you wish to nominate someone who is not a dependant under superannuation law (ie siblings, parents), nominate the estate. Then update your Will to instruct that, once the super money is received by the estate, it is paid to those specified beneficiaries.

Having a valid binding nomination means that the trustee must pay the nominated beneficiaries as directed by you, as long as they qualify as dependants at the relevant time, and the nomination is current.

Having a valid binding nomination speeds up the payment of benefits when you die and provides certainty that your wishes are carried out.

In most super funds a binding nomination is only valid for up to 3 years from the date of signing the nomination form. During this time, a binding nomination can become invalid under certain circumstances, including:

  • marriage;
  • divorce; or
  • death of the nominated beneficiary.

It is important that you review your binding nomination regularly and update it as your personal circumstances change, or, at least every 3 years after you made your last binding nomination. You can cancel or change your nomination at any time.

What Happens If I Don’t Nominate Anyone?

If you don’t nominate someone specifically, the superannuation fund may:

  • Pay your estate so that benefits are divided according to your Will. If you die without a Will, your benefits will be divided according to a state-based formula; or
  • Look for eligible beneficiaries and pay them directly.

So, your super may end up in the wrong hands. Even if it ends up in the right hands, it will take much longer to get there.

How Much Tax Will My Beneficiaries Pay On My Super?

Another issue to consider is the amount of tax payable on the super death benefit. Superannuation death benefits are tax free when they are paid directly to “dependants” under tax law. When you nominate your estate, tax may be payable if some of the money goes to beneficiaries who are not dependants under tax law.

If your funds are left to beneficiaries who are not dependants for tax purposes (eg an adult child), they will be taxed on the taxable component of any death benefits they receive from your super.  Under tax law, a “dependant” includes:

  • Your spouse (including a de facto spouse);
  • Your children under 18;
  • Anyone who is financially dependent on you at the time of your death; or
  • Anyone with whom you have an interdependency relationship at the time of your death.

A person who is a dependant under superannuation law, may not be a dependant under taxation law. For example, a child over the age of 18, who is not a financial dependant or an interdependent, will be considered as a dependant under superannuation law, but not under taxation law. This means that, although they can be nominated to receive your super directly, they may pay tax on the death benefit.

This table shows who are dependants under superannuation and taxation law.

* If also financial dependant or an interdependent

What you need to know

This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.