What Happens to Your Super When You Die? A 2024 Guide for Australians

Written on the 19 September 2024 by Parkside InvestorPlus

Have you ever wondered what happens to your superannuation (super) when you pass away?

It's a crucial question that many Australians overlook.

In this article, we'll break down the essentials of super death benefits in simple terms, helping you understand how to plan for your loved ones' financial future.

The Basics of Super Death Benefits

When you die, your super doesn't automatically go to your family.

Instead, it becomes what's called a "death benefit."

This money can be paid to your dependants or to your estate, depending on how you've set things up.

Who Can Receive Your Super?

Under current Australian law, your super can go to:

1.      Your spouse (including de facto partners)

2.      Your children (of any age)

3.      Anyone financially dependent on you

4.      Your estate (through your will)

The Importance of Nominating Beneficiaries

The best way to ensure your super goes where you want it to is by nominating beneficiaries with your super fund.

This is like leaving instructions for your super fund to follow.

Without a nomination, the fund trustees decide who gets your super, which might not align with your wishes.

Types of Nominations

Binding nominations: These are legally binding and must be followed by your super fund.

Non-binding nominations: These act as a guide, but the final decision rests with the fund trustees.

Tax Considerations

It's important to note that how your super is taxed after your death depends on who receives it:

• Dependants (as defined by tax law) generally receive super death benefits tax-free.
• Adult children who aren't financially dependent may have to pay tax on the benefits they receive.

Special Considerations for 2024

As of 2024, there have been some updates to super regulations:

• The age limit for dependent children receiving death benefit pensions has been extended in some cases.
• There are new rules around the transfer balance cap, which affects how much can be paid as a death benefit pension.

Planning Ahead

To make things easier for your loved ones:

1.      Keep your beneficiary nominations up to date, especially after major life events.

2.      Consider seeking professional advice to optimize your super death benefit strategy.

3.      Inform your family about your super arrangements to avoid confusion later.

Remember, your super is often one of your biggest assets.  

Taking the time to plan how it will be handled after you're gone is one of the most important financial decisions you can make for your family's future.

By understanding these basics and staying informed about the latest regulations, you can ensure that your hard-earned super benefits your loved ones in the way you intend, even after you're gone.

At Parkside InvestorPlus, we will provide you with sound advice and strategies to ensure your hard-earned superannuation benefits are distributed as you wish.

Please contact us on (02) 9899 4899 for a no obligation consultation.