Super, beneficiaries, and taxes

Your super is a major asset, so it's worth thinking about what happens to it if you should pass away. Who receives the super and will it be taxed?

No-one likes to think about an unexpected death, so making appropriate arrangements is often low on the ‘to do’ list. But if you pass away without making your intentions clear, you may leave a complex burden on those you love at the very time they’re in need of support. It’s much better for everyone if you make clear your plans in the event that something happens to you. This is the key to good estate planning.

Have you made a Will? If not, it’s important make and review your Will from time to time, to make sure it continues to reflect your wishes, as priorities can change over time. Also consider appointing a medical treatment decision maker and financial Power of Attorney to ensure your affairs are well managed, should you be unable to make important decisions for yourself.

What about your super?

Super is a major asset, so it’s important to understand what happens to it should you pass away. After your passing, your super is referred to as a ‘death benefit’ and the person who receives it is your ‘beneficiary’. You can nominate one or more beneficiaries.

People often choose to nominate beneficiaries when they want to:

control how their benefit is divided, and who receives it
reduce stress and conflict for their families at the time of their death
provide clarity where there are complex family relationships, especially if there are ex-spouses and current de-facto partners.

Three types of nominations

If you receive a pension or regular Income Stream payments from us, you can make a ‘reversionary nomination’, which allows you to say who (generally a spouse or de-facto) will continue to receive your pension after your passing.¹

However, if you have a lump sum to be allocated, you can make either a binding or non-binding nomination of your beneficiaries. A ‘non-binding nomination’ is only considered a guide as to how your super is allocated. The ESSSuper Board will be guided by your nomination and will ultimately determine who receives a benefit.

Binding nominations give greater control

If you want control over exactly who receives your super benefit and in what proportion, you need to make a ‘binding nomination’. You can nominate one or more beneficiaries and the proportion of your benefit they will each receive. However, a binding nomination is only valid for three years, so it’s important you keep it up to date.²

If you don’t make a nomination, the ESSSuper Board will determine who your benefit goes to. This usually means distributing the benefit to your dependents or to your Legal Personal Representative who will then distribute it according to your Will.

Who can you nominate?

You can only nominate beneficiaries who are considered ‘dependants’, or your Legal Personal Representative. Dependants can include:

your spouse or de-facto partner
your child, or your spouse/de-facto's child
any person who was dependant on you for financial support at the time of your death.²

Will the benefit be taxed?

If you nominate a child under 18 years old or your spouse/de-facto, generally the benefit is tax-free. However, if the child is over 18 years old and not financially dependent on you, then the benefit may be taxed at 15% (plus 2% Medicare levy) when it’s paid from your super fund.² This can vary depending on your fund and situation.³

You can make or update your non-binding nominations at any time via Members Online. However, to make a binding nomination, you need to complete the appropriate form for your fund. Remember all binding nominations expire after three years and if you have multiple ESSSuper accounts, you will need to nominate beneficiaries for each account.

Seek advice before making decisions

Estate planning, death benefits and the tax implications can be complex depending on your situation. It’s a good idea to get legal and financial advice before making any major decisions. ESSSuper Financial Advisers⁴ are able to help you with estate planning. Just contact us if you’d like to set up a meeting.

1. Reversionary nominations, ESSSuper
2. Beneficiaries, ESSSuper
3. Superannuation death benefits: Who receives super payments, and how much tax is paid?, October 17, 2018 by Trish Power, SuperGuide
4. ESSSuper Financial Advisers are authorised representatives of Adviser Network Pty Ltd (Adviser Network). Adviser Network holds a current Australian Financial Services Licence No. 232729 and is responsible for the financial services provided to you. ESSSuper has an arrangement with Adviser Network Pty Ltd to provide financial advice to ESSSuper members. ESSSuper pays Adviser Network a fee for this service. Neither the Board, nor the Victorian Government, guarantee or endorse any recommendations made by Adviser Network, or are responsible for the advice and actions of Adviser Network.

The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper’s Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at esssuper.com.au or by calling 1300 650 161.

Super, beneficiaries, and taxes

Your super is a major asset, so it's worth thinking about what happens to it if you should pass away. Who receives the super and will it be taxed?

What about your super?

Three types of nominations

Binding nominations give greater control

Who can you nominate?

Will the benefit be taxed?

Seek advice before making decisions

Have you registered for Members Online?

2019 Seminar Program

Multiple super funds?

Thinking of retiring?

Do something super for your spouse.

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