Estate Planning

Upon a person’s decease, superannuation benefits can be paid either to the estate or directly to a dependant. If you want to have the benefits paid directly to a person, the superannuation fund will usually require a nominated beneficiary form (which can be either binding or non-binding upon the trustee) to be completed.

Australian superannuation legislation defines a dependant as: "any person who is or was the spouse of the person and any child of the person." A spouse is someone who "lives with the person on a bona fide domestic basis as their husband or wife."

Death benefits may also be payable to those financially dependent on the deceased at the time of death. Unlike spouses and children who are explicitly named in the legislation, financial dependants fall clearly within the normal meaning of "dependant."

It is important to make sure you update your nomination form with your superannuation fund when there are any changes in personal circumstances. If the super fund has a binding system in place and you don't inform them of a change, then the superannuation fund is legally obliged to pay the benefits to the person nominated, even though you may not have wanted this particular person to receive the benefits.

Dependants:

If the superannuation account is in accumulation phase, then the benefits will be paid tax-free to the dependant up to the deceased's pension Reasonable Benefit Limit (currently $1,356,291 for the 2006/07 financial year). Any amount paid above the Pension RBL will be taxed including the Medicare levy.

If the superannuation account was in pension phase, the benefit is paid tax-free if the pension was 100% fully rebateable. Any amounts that are excessive (that is, not fully rebateable) will be taxed at the highest marginal rates.

Non-dependants:

If the superannuation benefits were in accumulation phase, then the benefits are taxed as a Death Benefit ETP. The tax applicable will be dependent upon the components of the super account.

If the benefits were in pension phase, then the benefits are taxed as a Death Benefit ETP, if the pension was fully rebateable. Otherwise they are taxed at the highest marginal rate for amounts that are excessive.

The tax rates for Death Benefit ETPs are as follows:

Death benefit ETP component	Tax rate
Pre July 1983 component	5% of the amount included in the recipients assessable income
Post June 1983 component (taxed source)	15% plus Medicare levy
Post June 1983 component (untaxed source)	30% plus Medicare levy
Undeducted contributions	Nil
Concessional component	5% of the amount included in the recipient's assessable income
Excessive component	47% plus medicare levy

Estate Planning

Dependants:

Non-dependants:

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