Compulsory superannuation commenced in the early 1990’s, introduced by the Keating government. From that time, employers had to pay super to employees. Tax concessions were attractive to allow any worker to also contribute to a super fund. Assets in super funds are taxed at a lower rate.
Over 20 years later, there is around $1.7 trillion dollars held in superannuation funds across Australia. Only Denmark holds more per capita in super.
As a result, superannuation is often an individual’s largest asset, often surpassing the family home.
Super can be held by a retail or industry super fund, where someone else looks after it or it can be held by a self managed superannuation fund (SMSF), where you (or your company) looks after it. SMSFs are becoming increasingly popular as people like to know where their money goes and to have control of their investments.
You are a member of your super fund.
The super that collates during a member’s working life is released usually after retirement at around the age of 60 when it can be paid out tax free by a lump sum or by pension depending on the terms of the Fund.
What a lot of people don’t know, is that superannuation is not an asset that they own and it cannot be given to their loved ones by their will.
Therefore it is so important for members to think about what happens if they die either before retirement or while they are receiving a pension.
Their super may not end up where they want it to, unless they are careful.
One way you can be sure that your super goes where you want is to make a binding death nomination (BDN). Unfortunately for industry and retail super funds these nominations only last for three years. If a member loses capacity (for example, has dementia), they will not be able to renew a BDN unless steps are put in place.
A member with a SMSF can take steps to ensure that the person controlling the fund after they die will pay their super how they want. These members can usually make a BDN and sometimes can direct payment via their wills, depending on the terms of the super fund deed.
This is a complex area and if appropriate measures are not taken, a member’s super may end up, for example, with an estranged child or to one child to the detriment of others. There have been many recent cases through the courts in this area.
This article is general information only and should not be relied on without obtaining further specific information.
Author: Linda Alexander