A guide to super death benefit claims

If someone in your family or someone close to you dies, you may be able to bring a claim with their super fund for the sum of their super account balance and any death insurance they held in their super account. This is called a death benefit claim.

In this blog, we explore:

• who can be paid a death benefit;
• determining if you are a dependant or have an interdependency relationship for the purposes of receiving a death benefit;
• what a binding nomination is;
• tax concessions if found to be a dependent; and
• how super fund decisions can be contested.

Who are death benefits paid to?

Subject to the rules of each super fund (which are detailed in their respective trust deeds and referred to in specific insurance policies), if a deceased person did not make a binding nomination before their death, a trustee (the super fund) may pay the sum of the deceased’s super balance and any death insurance benefit to:

• a dependant or various dependants; or
• the deceased's legal personal representative (executor of their estate) for distribution according to the instructions in the deceased's Will; or
• a non-dependant.

Dependants or interdependency relationships for death benefit payments

For the purposes of deciding who receives a death benefit, someone is a dependant of the deceased if, at the time of their death, they were:

• their spouse or de facto spouse;
• a child of the deceased (any age); or
• a person in an interdependency relationship with the deceased.

Proving you were a de facto spouse of the deceased

If you were not married to the deceased but were in a de facto relationship with them, it can sometimes be difficult to prove the existence of the relationship. This is particularly true if the relationship is contested by children of a previous relationship.

In the case of Roy v Sturgeon (1986) 11 NSWLR 454, a number of factors were considered in determining whether two people have been in a de facto relationship:

1. the duration of the relationship;
2. the nature and extent of a common residence;
3. whether or not a sexual relationship exists;
4. the degree of financial dependence or interdependence;
5. ownership, use and acquisition of property;
6. the degree of mutual commitment to a shared life;
7. the care and support of children;
8. the reputation and public aspects of the relationship.

We often need to provide proof to the trustee when establishing as many of the above points as we can. This be with statutory declarations, bank statements, photos, shared bills etc.

If you’re having difficulty proving a de facto relationship with the deceased, you should seek legal advice.

Call for free advice Australia wide: 03 9448 8048

Proving you were in an interdependency relationship

An interdependency relationship exists between two people if all of the following conditions are met:

1. They have a close personal relationship; and
2. They live together; and
3. One or each of them provides the other with financial support; and
4. One or each of them provides the other with domestic support and personal care.

You can prove an interdependency relationship in the same way you can prove de facto. That is, by providing statutory declarations, bank statements, photos, shared bills and any other evidence of a shared life.

Importantly, the interdependency requirements mean that if the deceased was dependent on you (e.g. if you were providing care for the deceased at the time of their death), then an interdependency relationship can still exist.

Binding nominations

A binding nomination is a written direction from a super fund member to the trustee of the fund detailing how they wish some or all of their super account balance and death insurance benefits to be distributed. Notably, binding nominations need to be reviewed regularly as they expire after a period, typically three years.

Binding nominations are typically forms completed by members on a template provided by their super fund. A binding nomination may be in place if the deceased person had multiple dependants and the deceased had firm ideas about who the death benefits should be paid to.

If you are unsure if there is a binding nomination, the trustee will know, or it will become clear once you write to them, letting them know that you would like to proceed with a death benefit claim.

A binding nomination can only be made in favour of a dependant (see below).

Trustees of a super fund generally have no discretion to override a valid binding nomination, and a binding nomination can only be challenged on the grounds of validity (e.g. the nominator did not have legal capacity to make the nomination, or it was not executed correctly, or the recipient is not a dependant).

Tax concessions if found to be a dependant (including an interdependency relationship)

If you are awarded a death benefit, it is important to check that the trustee has paid you as a dependant or as being in an interdependency relationship. Otherwise, the death benefit will be subject to tax.

A lump sum super death benefit paid to someone who is not a dependent for tax purposes is usually subject to tax.

In contrast, lump-sum death benefits paid to someone who does qualify as a dependent for tax purposes are usually tax-free. If you have concerns about the tax treatment of a benefit that you receive, we recommend that you seek financial or accounting advice.

Contested decisions of a super fund in death benefit claims

If the trustee decides that you are entitled to the death benefit, the decision will still be subject to a “claim staking period” of approximately 28 days, during which the trustee will try and contact any other potentially interested parties. This claim staking period will be longer if the interested parties are overseas.

So, it is important to temper your expectations in this period because further appeals can and do happen after the trustee has made their initial decision.

Get help from an insurance lawyer

If you are notified of a decision related to a death benefit claim being contested, you should seek legal advice about your options. Similarly, if a decision goes against you, it can be contested, and you should speak to a lawyer.

At Berrill & Watson, we have significant experience in all aspects of death benefit claims, including contested claims.

Contacting Berrill & Watson

📞 Melbourne: 03 9448 8048

📞 Brisbane: 07 3013 4300

📞 Anywhere else in Australia:  03 9448 8048

📧 [email protected]

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