Nominating a beneficiary tells us what should happen to your money and insurance benefit if the worst were to happen to you. Making those nominations is an easy way to protect your super savings as well as provide security for your family.
Generally, you have to select a “dependant” as your beneficiary. Legally, this is defined as someone you have an interdependent financial relationship with. This can include a spouse, your children, or people who depend on you financially.
Nominating a beneficiary is easy and can be done in just a few seconds by logging in to your account using catholicsuper.com.au.
There are two different types of nominations.
The most common is a non-binding beneficiary. This guides the fund trustee on who should receive your super benefits.
A binding nomination is a limited-term contract – which can expire after a few years – that requires payment to either a specific group of dependants or a legal representative to pay your benefits according to the wishes in your will.Nominating your beneficiaries is as important as it is easy. Want to learn more? Visit us at catholicsuper.com.au.
Why it’s important to discuss death when it comes to your super
- Your super does not automatically fall under your estate or will.
- There are restrictions on whom you can name as a beneficiary for your superannuation account.
- The way your super benefit is taxed upon death depends on a few factors including whether the payment is made to a tax dependent.
A conversation about what happens to your super after you pass on is not something that is easy to have. Nonetheless, it is an important one to discuss so you can have peace of mind that those who matter to you are taken care of financially when you are no longer around.
Why you should nominate a beneficiary
Given that super does not automatically form part of your estate, the monies (also referred to as a death benefit) are not distributed via your will, unless you have arranged to leave it to your legal personal representative, the executor of your estate to manage. Therefore, nominating at least one beneficiary can ensure that your hard-earned money will be distributed according to your wishes when you pass away.
There are two options for nominating the distribution of your superannuation benefits upon your death:
1. A binding death benefit nomination.
2. A non-binding death benefit nomination.
With a binding nomination, the trustee must pay your death benefits as you have nominated. Note that a binding nomination will lapse three years from the date you make or vary your nomination. If it lapses, it will become a non-binding nomination. At the end of three years you will need to renew your nomination. There are also rules as to whom you can nominate.
With a non-binding nomination, Australian Catholic Superannuation & Retirement Fund has full discretion to distribute the funds but will generally take your nominated beneficiary into account.
Who can be a nominated beneficiary?
You can nominate one or more dependants or your legal representative to receive your super. If you nominate your legal personal representative, the benefit will be paid to your estate.
Under superannuation law, someone is a dependant of the deceased if at the time of death, they were:
- your spouse (including a de facto partner);
- your child (including an adopted or stepchild);
- a financial dependant; or
- a person in an interdependent relationship with you.
An interdependency relationship exists between two people if:
- they have a close personal relationship;
- they live together;
- one or each of them provides the other with financial support; or
- one or each of them provides the other with domestic support and personal care.
If you want to leave your super to someone else who does not meet the criteria outlined above, you will need to nominate your legal personal representative so that your wishes can be managed via your will.
What happens if I have an account-based pension?
If you have a pension account, your funds can be dispersed as a lump sum or you can nominate for your beneficiary to receive the pension as an income stream.
The latter option is referred to as a reversionary pension.
A reversionary pension beneficiary can be:
- your spouse or de facto partner;
- a child (up to age 25); or
- someone in an interdependent relationship with you at the time of your death.
A child between the ages of 18 and 25 can only be nominated as a beneficiary if they are financially dependent on you at the time of your death or have a disability as outlined in theDisability Services Act 1986.
If you wish for your pension to be paid to a child between the ages of 18 and 25, the payment will continue until they turn 25 or the balance reaches $0.
Once the child reaches the age of 25, the balance will be paid out in a lump sum. However, the beneficiary can continue to receive the pension as an income stream if they meet the criteria outlined in the Disability Services Act.
What if I want to update a reversionary nomination that is currently in place?
To do this, you will need to set up a new account-based pension. However, doing so may have implications on your Centrelink benefits. If you are unsure or need more information, speak to a financial adviser.
How do I make a nomination?
To nominate a beneficiary:
1. Log in to your account
2. Select ‘My details’, followed by ‘View/Update beneficiaries’.
3. If you choose the non-binding beneficiary option, complete the online form.
4. If you prefer to have a binding death benefit beneficiary, download and complete the ‘Nomination of Beneficiaries’ form and either post or email it to us.
Note: You must complete a nomination for each account you have with the fund.
What are the tax implications for a beneficiary?
Another thing you may consider when organising your estate is the tax implications of your super, which depends on factors such as:
- whether the money is paid as a lump sum, income stream or a combination of both;
- whether your beneficiary is considered a dependant by the Australian Tax Office (ATO). Note that the definition of a dependant under superannuation law may not be the same as how the ATO defines a tax dependant;
- your age and that of your beneficiary at the time of your death. This may have an impact on a reversionary pension;
- the tax-free and taxable components of the super; and
- whether insurance proceeds are included in the payment to your beneficiary.
A tax dependant can be:
- your current or former spouse or de factor partner;
- your child who is under 18;
- someone in an interdependent relationship with you; or
- any other person financially dependent on you.
Generally, your tax dependant will not need to pay tax on the taxable component of your super if they receive it as a lump sum. If they receive the money as an income stream, different tax rates may apply.
If you are leaving your super to someone who is not a tax dependant, they can only receive the money as a lump sum. The taxable component of the payment will be taxed at a maximum rate of 15% plus Medicare levy while the untaxed element will be taxed at a maximum rate of 30% plus Medicare levy.
Super paid to your legal personal representative will be taxed in the same way as if it is paid directly to your beneficiaries. However, the estate will not be subject to Medicare levy.
What are the steps that my beneficiary needs to take to access my super after I’ve passed on?
We understand that dealing with death is hard. To lighten the administrative burden for your beneficiary, they can contact us so we can guide them through the process of accessing your super.
If you need help with the financial details of planning your estate, our financial planning team can assist. Simply leave your details to organise a call back.
Any advice contained in this document is of a general nature only, and does not take into account your personal objectives, financial situation or needs. Prior to acting on any information in this document, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek independent financial advice if you are unsure of what action to take.