Superannuation beneficiary rules

What is a superannuation beneficiary?

Your superannuation beneficiary is the person (or people) who you nominate to receive your super fund money if you die. It's important to make sure you've nominated your beneficiary (or beneficiaries) to ensure your super is paid out to those who you'd like it to go to. If you don't nominate a beneficiary, the trustee of your super fund may nominate who the money is given to.

Who can be a superannuation beneficiary?

Your nominated super beneficiary must be a dependent. A 'dependent' for superannuation purposes can be any of the following:

• A person dependent on you financially (for example someone who relies on you to pay regular bills and living expenses)
• A child (including adopted children and step children)
• A spouse (including de facto partners)

A spouse is regarded as being a person you have legally married, a de facto partner (as long as the partnership has been formerly registered in an Australian state or territory), or any other person you are not legally married to, but who genuinely lives with you in a relationship as a couple.

Types of superannuation beneficiaries

There are two main types of beneficiary options to choose from. depending on your fund, you might only be able to make a non-binding nomination.

Binding beneficiary

A binding nomination is, as the name suggests, legally binding. If you make a binding nomination your fund trustee must distribute your super benefit to your nominated beneficiary, regardless of your situation before death and regardless of what it might say in your will.

A binding nomination will usually only last 3 years before it converts into a non-binding nomination. This is because your personal situation may change over time. For example, you might have nominated a previous spouse, or perhaps you've had another child since nominating your original beneficiaries. Having a binding nomination lapse every 3 years gives you the opportunity to reassess your choices. Make sure you re-visit your beneficiary nominations every few years to ensure they're up-to-date.

Non-binding beneficiary

A non-binding nomination isn't legally binding, but it's still used by your fund to help determine who should receive your super. You fund trustee with use your non-binding nomination as well as their best discretion to determine where your benefit should be paid. Your fund will consider your personal situation and relationships at the time of your death, as well as consider if you have any dependents and what's stipulated in your will.

Because it's non-binding, tis type of nomination doesn't lapse after 3 years. You're still able to change or update your non-binding nominations at any time.

What if I have no dependents or don't choose a beneficiary?

In the case where you have no dependents as are defined under superannuation rules you can arrange a brother, sister or even a charity to receive your superannuation proceeds should you happen to die. You can do this by nominating your estate as your preferred beneficiary. By doing this you can determine where the money finishes up by making the necessary provisions in your will.

If you don't nominate any super beneficiaries, your super fund will pay your super benefit to your estate. Your estate or legal representative will then distribute your super in line with your will. If you don't have a legal representative or estate, the super fund trustee will use their full discretion on how the money should be distributed (it would likely go to any spouse or dependents you have).

Because it can become rather complex, and it being something you want to get right, you should always seek professional advice when it comes to settling matters concerning your superannuation death proceeds, your will and your individual personal circumstances.

How to set your super beneficiary

1. Choose your beneficiary (or beneficiaries). Decide who you'd like your super to go to if you died, keeping in mind you must nominate a dependent.
2. Determine the split of funds. Decide how you'd like your super to be split between your beneficiaries if you'd like to nominate more than one person
3. Decide the payment type. You can nominate your beneficiaries to receive your super in one lump sum payment or in the form of a regular income stream.
4. Inform your super fund. Tell your super fund who you've nominated - you can do this yourself in your online account portal or by calling your fund