Superannuation Nominations
Superannuation nominations allow you to specify who will receive your superannuation benefits upon your death, ensuring your wishes are honoured and potentially avoiding disputes.
Importance of Nominating Beneficiaries
When you pass away, your superannuation is not automatically included within your Estate and may not be distributed according to your Will. By nominating beneficiaries, you can ensure that your super benefits, including any life insurance, are paid to the individuals you choose.
Who can be a beneficiary?
- A current spouse or partner
- Children of any age
- Someone who is in an interdependent relationship with you
- Anybody financially dependent on you when you die
- Your estate or legal personal representative.
Types of Nominations
1. Binding Death Benefit Nomination
This legally binds your super fund to pay your nominated beneficiaries. Previously, these nominations needed updating every three years, but they are now mostly non lapsing in the most part for the majority of super funds.
2. Non-Binding Nomination
This serves as a guide for the trustee of your super fund but does not legally compel them to follow your wishes. The trustee will consider your nomination alongside other factors when deciding who receives your super.
3. Reversionary Nomination
This is specifically for pension accounts, allowing you to nominate a beneficiary who will continue to receive your pension payments after your death. This nomination takes precedence over other types of nominations.
Super Death Benefit Tax
The taxation of super death benefits depends on the recipient’s relationship with the deceased and the components of the super funds.
Generally, if funds are paid to a dependant beneficiary (spouse, children and those financially dependant on the deceased), they receive the funds tax free.
If the funds are paid to a non-dependant (such as adult children) then tax will apply on the taxable components of the deceased’s super fund balance starting at 15%, plus Medicare (if paid directly to the beneficiary as opposed to the deceased’s Estate).
Regularly Review your Nominations
It is crucial to review your nominations regularly, especially after significant life events such as marriage, divorce or the birth of a child. This ensures that your superannuation benefits are directed to the right individuals according to your current wishes.
By understanding and managing your superannuation nominations, you can have peace of mind knowing that your hard-earned super funds will be distributed according to your preferences. For more information, please contact our office today.