What happens to your Super if you pass away?


Superannuation is a cornerstone of retirement planning in Australia, designed to provide financial security in your later years. But have you ever wondered what happens to your super if you pass away? Understanding the protocols and options can help ensure your funds are distributed according to your wishes and can significantly ease the burden on your loved ones during an already difficult time.


The Importance of Planning

Planning for what happens to your superannuation fund when you pass away is an essential part of estate planning. Unlike other assets, superannuation is not automatically included in your will. Instead, it falls under the rules and regulations set by your super fund and the Australian Government. Let’s delve into the key aspects to consider.


Binding Death Benefit Nomination

One of the most crucial steps you can take is to make a Binding Death Benefit Nomination (BDBN). A BDBN is a legal document that directs your super fund trustee on how to distribute your superannuation benefits upon your death. Here are the key points to know:

  • Validity: A BDBN typically needs to be renewed every three years to remain valid.
  • Who Can You Nominate?: You can only nominate dependents (such as your spouse, children, or anyone who is financially dependent on you) or your legal personal representative (executor of your will).


Non-Binding Nomination

Alternatively, you can opt for a Non-Binding Nomination, which serves as a guide for your super fund trustee. However, this type of nomination is not legally binding, meaning the trustee has the final say on how your benefits are distributed. While this offers more flexibility, it may not guarantee that your wishes are followed precisely.


No Nomination

If you haven’t made any nomination, the trustee of your super fund will decide how to distribute your superannuation benefits. This decision is made based on the fund’s rules and usually considers factors such as your dependents and the nature of your relationship with them. However, this can lead to delays and potential disputes among family members.


Understanding Dependents

The term “dependents” has a specific definition in the context of superannuation death benefits. According to Australian law, dependents include:

  • Spouse: This can include de facto partners.
  • Children: Including adult children, adopted children, and stepchildren.
  • Financial Dependents: Anyone who was financially dependent on you at the time of your death.
  • Interdependent Relationships: Someone you have a close personal relationship with, live with, and share financial support with.


Tax Implications

It’s also important to understand the tax implications associated with superannuation death benefits. The tax treatment depends on several factors, including:

  • The Recipient: Whether the benefit is being paid to a dependent or non-dependent.
  • Type of Benefit: Lump-sum payments to dependents are generally tax-free, whereas payments to non-dependents may be subject to tax.
  • Taxable and Tax-Free Components: Superannuation benefits often consist of taxable and tax-free components, which are treated differently for tax purposes.


Steps to Take Now

  • Check Your Super Fund’s Rules: Different super funds have different rules regarding death benefit nominations. Make sure you understand your fund’s specific requirements.
  • Make or Update Your Nomination: Whether you choose a binding or non-binding nomination, ensure that it reflects your current wishes and family circumstances.
  • Review Regularly: Life circumstances change, so it’s essential to review and update your nomination regularly, especially after significant life events such as marriage, divorce, or the birth of a child.
  • Seek Professional Advice: Consult with a financial adviser or estate planner to ensure that your superannuation is handled in the most tax-effective and legally sound manner.


Understanding what happens to your superannuation when you pass away is vital for effective estate planning. By making a binding death benefit nomination, keeping your nominations up to date, and seeking professional advice, you can ensure that your super is distributed according to your wishes and provide peace of mind for your loved ones.

Don’t leave this important matter to chance. Take action today to secure your financial legacy.

For more information on managing your superannuation and estate planning, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.



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