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Superannuation Death Benefits – What Happens When I Die?

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October 13, 2023

Self-managed super funds (SMSFs) are becoming increasingly popular for investments. SMSFs provide a range of benefits for those looking to invest, including greater control over investment decisions and the potential for tax savings. 

The fund’s contents are paid to a designated person or people, usually with an insurance payment. It can be hard on families who are already dealing with a loss. 

What is a Superannuation Death Benefit?

What is a Superannuation Death Benefit?

Superdeath benefits are an aspect of estate planning for anyone with superannuation. It is important to note that not everyone is entitled to pension benefits in the event of death. Generally, only the decedent’s dependents, such as spouse, children, and financial dependents, are eligible. It should be completed as soon as possible because potential issues arise while determining who will be the beneficiary. 

A death benefit is a payment made by the super provider to a surviving beneficiary in the event of the death of the holder of the super. According to the Australian Taxation Office, the term ‘super death benefit’ applies to all super payments made after the death. Be aware of the superannuation death benefit tax in retirement, as this can impact the amount the beneficiary receives.  SMSF consultants provide smsf compliance advice and guidance on self-managed superannuation funds (SMSFs). 

Who Can Receive a Super Death Benefit?

When it comes to superannuation death benefits, not everyone is eligible to receive them. Generally, the beneficiaries who can receive these benefits are dependents of the deceased, such as spouses, children, and financial dependents. However, it’s important to note that each Australian super fund may have its own rules regarding who can receive death benefits, so it’s essential to check with your fund to ensure you understand their specific requirements.

Additionally, nominate your beneficiaries correctly to ensure that your super-death benefits are as per your wishes. There are different types of beneficiary nominations, including binding and non-binding nominations, and it’s essential to understand the differences between them. Lastly, it’s important to consider the taxation of the Australian super death benefit, as the tax implications can vary depending on the beneficiary and the type of benefit received. 

Who Can I Nominate as My Super Beneficiary?

Firstly, it’s important to note that not everyone is eligible for these benefits. Typically, this is limited to your spouse or partner, children, and other dependents. However, if you have no dependents, you can nominate someone else, such as a friend or charity. They offer SMSF setup, administration, compliance, taxation, investment strategies, and estate planning.

Update your application, especially if there are changes in your circumstances, such as divorce or a new child. There are different types of beneficiary designations, including binding and nonbinding, and each type has advantages and disadvantages. Understand the taxation of death benefits in retirement because it can significantly affect the amount your beneficiaries receive. Seek professional advice and understand your rights and responsibilities about superannuation death benefits to ensure your wishes.

What are the Different Types of Beneficiary Nominations?

What are the Different Types of Beneficiary Nominations?

1. Non-Binding Nomination

This type of nomination suggests your preferred beneficiaries receive your superannuation benefits upon your death, but it’s not legally binding on the fund trustee. The trustee ultimately has discretion in determining the distribution of benefits. Non-binding nominations offer flexibility, allowing the trustee to consider various factors when making the final decision. Non-binding nominations refer to the process of nominating someone for a position or award without any legal or contractual obligation for them to accept or fulfill the role.

2. Non-lapsing Binding Nominations

Unlike a lapsing BDBN, a non-lapsing binding nomination holds no expiration date, so it remains in effect until you change it. The trustee is legally obligated to distribute your superannuation benefits according to your specified beneficiaries in this type of nomination. Non-lapsing binding nominations are legal documents that decide who will receive your assets and benefits after your death. 

3. Reversionary Nomination

A reversionary nomination is for income stream pensions, such as account-based pensions. When you make a reversionary nomination, you specify a person (typically a spouse or dependent) who will automatically receive your pension income stream upon your death. This nomination bypasses the need for the assets to go through your estate or other beneficiary arrangements, and it can provide ongoing financial support to the nominated individual.

4. Lapsing Binding Death Benefit Nomination (BDBN)

A lapsing BDBN is a legal superannuation binding death benefit nomination where you specify one or more beneficiaries entitled to your superannuation benefits. However, it comes with an expiration date, usually every three years. You need to renew it to keep it in effect.

Lapsing Binding Death Benefit Nomination (BDBN) is a document that allows you to nominate whom you would like your superannuation benefit when you pass away. It is called a “binding” nomination as it legally requires the trustee of your superannuation fund to pay your benefit to your nominated beneficiaries. A lapsing BDBN has an expiry period, usually three years. 

To ensure the superannuation benefit goes to the intended beneficiaries, keep your BDBN updated and renew it within the specified timeframe. You should consult with your superannuation fund or seek legal advice to complete a lapsing BDBN and understand the specific requirements. 

What is the Taxation of Superannuation Death Benefits?

What is the Taxation of Superannuation Death Benefits?

The tax treatment of these benefits will depend on the type of beneficiary and the components. If the beneficiary is a dependant, such as a spouse or a minor then the benefit is tax-free. However, if the beneficiary is a non-dependant, such as an adult child or sibling, the wealth may be subject to tax.

Understand the tax implications of superannuation death benefits so your loved ones receive the maximum benefit possible. Seeking advice from a financial advisor or tax professional can help you navigate the complex tax laws surrounding superannuation death benefit payments.

The taxation of superannuation death benefits can vary depending on several factors, including the recipient’s relationship to the deceased, the components of the wealth, and the age at the time of death. 

The tax-free component of a death benefit super is typically paid tax-free to any beneficiary, regardless of their relationship to the deceased. If a minor child who is not financially dependent receives the taxable component, they may be subject to a higher tax rate.

It’s important to note that tax laws and regulations can change, and the specific taxation of superannuation death benefits may be subject to updates. Additionally, superannuation funds or the Australian Taxation Office (ATO) can provide information on the taxation of superannuation death benefits based on the latest regulations.


In conclusion, it is crucial to understand your rights and responsibilities regarding superannuation death benefits. Knowing who can receive these benefits, you can nominate your beneficiary, and the different types of beneficiary nominations can help ensure your wishes. Additionally, understanding the taxation of superannuation death benefits can help you make informed decisions about your investments and beneficiaries.

SMSF services refer to the administrative and compliance tasks of managing a self-managed superannuation fund. It is necessary to regularly review and update your superannuation beneficiary nominations to ensure that they align with your current wishes and circumstances. 

SMSF accountants specialize in managing self-managed superannuation funds (SMSFs). They are responsible for providing guidance and advice on various aspects of SMSFs, including compliance with relevant legislation, financial reporting, tax planning, investment strategies, and retirement planning.

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