How to nominate a beneficiary for your super or pension
Australia’s world-leading super system means that, by age 60, the average working Australian can expect to have hundreds of thousands of dollars in retirement savings.
It’s a lot of money and it represents years of hard work. In an ideal world you’d spend all your super across your retirement years. But what happens to any remaining super money when you die? With a death benefit nomination, that’s entirely up to you.
Nominate someone (called a beneficiary) to receive your remaining super by completing this form or read on to learn more about nominating a beneficiary.
Alternatively, if you have a pension, you can also nominate one beneficiary to receive your pension payments by completing this form.
You’re probably already familiar with wills. A will lays out clear instructions about how you’d like to distribute money and possessions held in your estate after your death. However, your estate doesn’t include everything you own.
Your super balance, for example, doesn’t automatically count as part of your estate. This is because super is ‘held in trust’ for you by the trustee of your super fund. In the event of your death, your super benefit must be paid out by your fund in a way that complies with both super rules and the rules of your fund.
So, how do you let your super fund know who should receive your super? Death benefit nominations work like a will, giving you a level of control over what happens to your super balance (including any proceeds from life insurance held within your super account) when you’re gone.
If you don’t complete a benefit nomination, your super fund may decide who your super is passed on to.
Who is an eligible beneficiary?
Under current super and pension rules, a beneficiary can only be a dependant or personal legal representative – the person appointed as executor or administrator of your estate – or some combination of these.1
A dependant may include:
your spouse (including a de facto spouse)
your children (regardless of age)
someone financially dependent on you (fully or partially)
someone you had an interdependent relationship with.
For a relationship to be considered ‘interdependent’, you and the other person must have a close personal relationship and generally live together. One or both of you must also provide financial support to the other, and one or both must provide domestic support and personal care to the other.2
Provided the rules of your fund allow, any of these people can be nominated as beneficiaries.
If you want to give some or all of your super to someone else (not listed above), you can nominate your legal personal representative (estate) to receive it. Your super will then be distributed in accordance with your will. It is important to ensure your will has been updated to include your super if you choose this option.
How will my super be paid to my beneficiaries?
Your super or pension fund may allow your beneficiary to receive your super as a lump sum, income stream (regular payments), or a combination.
There are, however, limits to who can receive an income stream – this option is only available to children under 18 (or under 25 if they’re still financially dependent). Even then, these income streams must be converted into a lump sum on or before your child’s 25th birthday, unless they have a permanent disability.
What are the different types of nominations?
There are four main types of benefit nominations that people may choose from, based on their goals and whether they have a super or pension account.
binding death benefit nomination (for super or pension accounts)
non-lapsing death benefit nomination (for super or pension accounts)
non-binding death benefit nomination (for super or pension accounts)
reversionary death benefit nomination (for pension accounts only)
CFS only offers non-lapsing death benefit nominations, and reversionary death benefit nominations for pension accounts.
Binding and non-lapsing death benefit nominations legally commit the trustee of your super fund to pay your super to your nominated beneficiaries, provided the nomination is valid at the time of your passing. This means your super fund must pay your super to the beneficiaries you nominated.
A binding death benefit nomination generally needs to be renewed periodically (usually every three years) to remain valid.
A non-lapsing death benefit nomination may remain valid indefinitely unless you choose revoke it and make a new one.
A reversionary beneficiary automatically becomes entitled to receive your super pension your death. With a reversionary pension, your existing super pension will continue to be paid, but to your beneficiary.
A non-binding death benefit nomination functions almost like a suggestion rather than instructions. Your super fund trustee will consider your nomination alongside the governing rules and super laws when determining who should receive your super.
This can be useful if you think your personal circumstances could change over time – for example, maybe you’re expecting your family to grow in the next few years, or are going through a separation.
What happens if I don’t make a nomination?
If you don’t make a benefit nomination, or your nomination is invalid, your fund’s governing rules will determine who receives your super. This may include:
Paying it to your legal personal representative (estate), or
Paying it to the eligible beneficiaries as your fund considers appropriate.
What taxes might my beneficiaries pay?
Depending on who your super is paid to – and how they receive the money – there may be taxes involved.
For lump sums, tax will depend on whether it is received by a tax-dependant. This is different to a super dependant and includes:
your spouse (including a de facto spouse) or former spouse
your children aged under 18
someone fully financially dependent on you
someone you had an interdependent relationship with.
If a tax-dependant receives your super as a lump sum, it’s tax free. In this case, your beneficiary doesn’t need to include it in their income tax return. However, a non-tax dependant may be required to pay tax on part or all of the lump sum they receive.
If a lump sum is paid to your estate, the tax will depend on whether it will be directed to tax dependants or non-tax dependants via your estate.3
For super paid to your beneficiary as an income stream, tax will depend on a range of factors, including the age of both you and the recipient and the taxable and tax-free components of your super account. In most cases, if either you or your beneficiary are aged 60 or over, the income stream payments will be tax free.
That doesn’t mean paying a lump sum to your dependants is always the smartest option. You should consider speaking with a financial adviser if you’re unsure on the most tax-effective way to pass on your super or just want to know more about how these taxes work.
Can a nomination be challenged?
A binding or non-lapsing death benefit nomination can provide more certainty than other nomination options. In most cases, where a binding or non-lapsing nomination remains valid at the time of death, it cannot be challenged via the super fund, the Australian Financial Complaints Authority (AFCA), or the Courts.
However, your nomination could be challenged on the grounds it is invalid at the time of death. For example, if there is insufficient evidence to prove the nominated beneficiary is a super dependant or the trustee cannot identify there is an estate.
It is also important to note that notional estate laws (currently only applicable in NSW) may in some cases allow a Court to make family provision orders out of assets that do not form part of a person’s estate – this can include super paid to an individual via a binding or non-lapsing death nomination.
How do I make a non-lapsing death benefit nomination?
Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at www.cfs.com.au/tmd, which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at www.cfs.com.au or by calling us on 13 13 36.