Losing a loved one is never easy. At this difficult time, it can be hard to understand how to find a deceased person’s superannuation and have a successful death benefit claim.
In Australia, superannuation funds pay out death benefits according to laws and regulations to dependent beneficiaries or the trustee of their estate. However, it’s important to note that non-dependents cannot receive superannuation benefits directly from the deceased person.
In addition to understanding the process for receiving a death benefit, beneficiaries should also be aware of the tax implications. At Aussie Injury Lawyers, our experienced team can guide and assist in setting up a legal personal representative and claiming death benefit payments. Read on to learn more about the process for receiving a super death benefit and what may be tax free.
What Is a Superannuation Death Benefit?
When a superannuation fund member passes away, the fund pays out a superannuation death benefit to the dependent beneficiary or the trustee of their estate. This payment should be made after the member’s death as soon as possible.
The benefit recipient and how it is paid depend on the super fund’s governing rules and the Superannuation Industry (Supervision) Regulations 1994 (SISR) requirements.
If the deceased had dependents, they could be paid via a super income stream, a lump sum, or both.
If they had non-dependents, they could only be paid via a lump sum unless the trustee has not been able to locate a legal personal representative or dependent of the member after making reasonable enquiries, in which case the benefit may be paid to an individual under Clause 6.22 of the SIS Regulations.
Who Can Claim Superannuation Death Benefits?
Following Australian superannuation law, superannuation death benefits are available only to the dependents and legal personal representatives of the deceased. LPRs are not lawyers but the executors or administrators of the deceased’s estate.
It’s important to note that a death benefit cannot be paid directly to a non-dependent from super. You cannot directly transfer your superannuation entitlement to a friend, cousin, or charity, even if you nominate them on your super fund’s website. This is because they are not financially dependent on you at the time of your death.
A non-dependent cannot receive superannuation benefits from a deceased person without the deceased’s LPR. You can nominate a dependent to claim your superannuation entitlements upon your death or nominate an LPR to distribute your superannuation following your will.
Requirements for a Death Benefit Payout
To receive a death benefit from a life insurance policy or super fund, the beneficiary must complete a death claim form and submit it to the insurance company or super fund with a certified copy of the death certificate. If multiple beneficiaries are listed on a policy, everyone must complete a death benefit claim form to receive the applicable death benefit.
When making a superannuation death benefit claim, the superannuation fund or insurance broker will contact the beneficiary to inform them of your specific requirements.
How to Find a Deceased Person’s Super
Financial records, such as bank statements, tax returns, and other financial documents, can help you find details about a deceased person’s superannuation account. If you’re stuck, the Australian Tax Department or the deceased’s previous employer are good places to start.
The deceased member’s superannuation details and tax information will be released by the ATO if you are the:
- Deceased’s legal personal representative
- BAS or Taxation agent
When you find a deceased person’s super fund, provide them with a copy of their death certificate or an extract from the Register of Deaths.
Requirements for Payout of Death Benefits
To receive a death benefit from a life insurance policy or super fund, the beneficiary must complete a death claim form and submit it to the insurance company or super fund with a certified copy of the death certificate. If multiple beneficiaries are listed on a policy, everyone must complete a death benefits claim form to receive the applicable death benefit.
When making a superannuation death benefit claim, the superannuation fund or insurance broker will contact the beneficiary to inform them of your specific requirements.
How to Make a Super Death Benefit Claim
To claim a superannuation death benefit, you must provide documents such as a certified copy of the deceased member’s birth certificate and trust deed and evidence of your relationship to the deceased member. If you’re the de facto spouse or an adult child of the deceased member, you may be entitled to the death benefit payment.
It’s important to contact the deceased member’s super fund as soon as possible after they have passed away to discuss your entitlements and the payment process. The super fund trustee will assess your claim and decide how much you’re entitled to based on the superannuation law and the terms of the trust deed. If you’re unsure about any aspect of the claim process or need advice on how to proceed, it’s a good idea to refer to the super fund’s website or contact their customer service team. Confirming the information you need and providing all the necessary documentation will help to speed up the process of deciding how the funds will be paid out to the beneficiaries.
Death benefits can provide important financial support to beneficiaries after the policyholder or member passes away. If you are named as a beneficiary of a death benefit policy, it’s important to be aware of the process for receiving the benefit and the tax implications. It’s also a good idea to consult with an accountant or attorney for current tax or legal advice.
What Are The Tax Implications for Lump Sum Death Benefits?
Regarding taxes on lump sum death benefits in Australia, the most important thing to know is whether you’re classified as a “death benefit dependent”. If you are, you won’t have to pay taxes on the lump sum death benefit you receive.
If you are not “death benefit dependent,” you’ll have to pay:
- A maximum of 15% plus the Medicare levy on the taxed part of the taxable component
- A maximum of 30% plus the Medicare levy on the untaxed part of the taxable component.
Tax Dependants According to Taxation Law
Similar to the requirements for an interdependent relationship under superannuation law, the following are considered interdependent relationship conditions under tax law:
The deceased’s spouse, de facto and same-sex partners
Children and step-children younger than 18 years old
Persons who are dependent on the deceased member
Persons who are in an interdependency relationship with the deceased.
Tax-Free Component
It’s worth noting that a lump sum death benefit will have a tax-free element if the super fund has claimed a tax deduction for a life insurance policy taken before the member’s death. If the super fund has not claimed a tax deduction, then the insurance policy proceeds will be treated as a taxed element of the taxable component of the lump sum death benefit.
Legal Help for Claiming Superannuation Death Benefits
Don’t hesitate to take proactive steps to determine if you are named as a beneficiary of a death benefit policy. Having important information and documents on hand can help make receiving a death benefit smoother and less stressful.
Please seek legal advice when you need help setting up a legal personal representative or to learn more about successfully claiming death benefit payments. Our experienced and helpful team at Aussie Injury Lawyers can help; Call 1300 873 252 or email via our contact form.
